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AUDUSD Analysis (Aug, 2022) Bear Trend Continues!

During the month of August we identified at the beginning of the month that AUDUSD analysis was showing significant bearish signs on a fundamental level, one of the key highlights was to spot any bearish signals around the red arrow below.

We're now coming towards the end of August and the bearish trend has set in, the fundamental signs were strong and the institutional investors agreed with the direction. The price of AUDUSD has fallen from 0.712 to 0.687 which is roughly a 3.5% drop from the high!

The RBA is still set to tightening interest rates as there's expected inflation rates of 8% by end of year.

Throughout the analysis what we've found over the past couple weeks is consistent bearish data suggesting the downtrend is continuing...

Technology Summary

The technology summary pages as you traders know is our high level analysis where we identify at a high level in a summary what's going on with a selected currency pair. In this case we see AUD/USD continue showing bearish signs since the analysis we did at the start of the month.

The main point of interest being the macro currency strength meter which we'll dive into soon.

At a glance we can see the major economic indicators showing bearish signs:

  • Currency strength meter

  • Interest rate differentials

  • Hedge fund positions

The only contradictory indicator being the GDP differentials...

Macro Currency Strength Meter

The macro currency strength meter was our main piece of analytical tool which helps us understand the direction of data for chosen currencies.

We can see at the start of August we saw data release negatively for AUD and positive for USD, this created a crossover for AUDUSD in favour of a bearish move.

Since this release we saw AUDUSD prices drop signicantly, you can check the previous AUDUSD analysis.

Now we're moving towards the end of the month and September we may see prices continue in the bearish direction if the data holds true.

GDP Differentials

The GDP differentials were one of the contradictory indicators within the analysis...

The main reason being that Australia is still expected to have higher growth rates than United States moving into 2023.

Therefore, it is suggested that towards 2023 we may start to see AUDUSD bottom out and have a bounce back towards the upside.

Trade Analysis (Imports/Exports)

Gold and AUDUSD follow one of the strongest correlations you can choose between a currency pair and a commodity.

Just at a glance you can see the behaviour is almost mirrored, as Gold prices rise we see AUDUSD rise and vice versa.

Over the past month Gold prices have fallen from its high and AUDUSD has also followed suit, it will be interesting to see if prices continue to drop.

WTI, crude oil is a commodity we always choose to analyse against AUDUSD as the United States is a big exporter of oil and Australian Dollar is classed as a similar riskier asset.

In this case we can see crude oil prices and AUDUSD are following a similar downwards trend over the past few months with crude oil prices dipping over the past few weeks, this so far supports the bearish data we're seeing for AUDUSD.

Iron ore prices are a commodity chosen which Australia tend to export, as you can see from the price action we have a similar strong positive correlation between the price of Iron ore and AUDUSD.

The price of Iron ore has been dropping since the end of last year and has dropped significantly.

Recently we saw iron prices rise slightly but was met with sellers straight away.

Interest Rate Differentials

The interest rate differentials were a huge factor within the analysis...

Australia and United States are both starting to tighten their monetary policies, however, we're seeing the United States increase rates at a much faster pace.

This has created a negative differential between the recent interest rates as Australia has a slower outlook.

Overall, majority fundamental factors are showing bearish data and movement in price has confirmed our analysis from earlier this month.

Hedge Fund Positions

The sentiment of the market for AUDUSD for the past 3 months has been bearish..

Hedge funds have consistently been bearish on AUD and bullish on USD as we see open interest diverging showing hedge funds have way more open sell positions on AUD than USD.

This shows that the market sentiment is also agreeing with the fundamental bearish movement of the markets and price has now confirmed the down trend... the real question is how long will the trend last?

Price Analysis

Throughout the price trends of AUDUSD we're seeing a clear downwards trend the past few months...

Now that the bearish fundamentals have lined up again we may see a correction in price and continuation to break new lows seen in mid July...

Definitely one to keep an eye on and catch any bearish technical signs.

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