As the war of words between Australian dollar bears and bulls continues charts indicate that the bears may have the right call in the short term.
Comments from Reserve Bank of Australia (RBA) Governor Glenn Stevens late last year that he would like to see the AUD trading at $0.85 against the U.S. dollar raised expectations that it would weaken significantly this year after. However, expectations for continued loose monetary policy by global central banks and continued Chinese reserve diversification limited downside momentum.
Yet, growing expectations that the RBA may cut interest rates before year end to tackle the stubbornly high currency could see near-term downside.
The AUD is developing a long-term uptrend breakout pattern, but the breakout is not developing at this time. The weekly chart shows the classic Guppy Multiple Moving Average (GMMA) trend change breakout pattern. This starts with a test of the lower edge of the long-term group of averages in the GMMA Indicator. The breakout pattern is flowed by a retest of the upper edge of the long-term GMMA and completed with a breakout above the upper edge of the long-term GMMA. This signals the start of a new uptrend.