There was no hiding place for the Australian dollar last week, which came under relentless and remorseless pressure, with the December futures contract closing with yet another wide spread down candle on Friday, and further confirming the bearish picture for the Aussie dollar. The trading volumes speak for themselves with a huge spike this week, jumping from the average of 120k per day to touch 180k as the price waterfall took shape, and sending a clear signal, if any were needed, that the big operators were selling heavily, and taking the market lower, fast. Thursday’s attempt to rally was duly snuffed out as the London and US sessions took control once more, with the candle closing with a deep upper wick, a sign of further weakness, which was duly delivered on Friday in spades. This week has also seen the pair break through several strong levels of potential support with the first at 0.9250, followed by 0.9180, 0.9120, 0.9060 and finally 0.9010, as the pair cascaded through like a stack of falling dominoes, finally closing at 0.8983 and bringing the bloodbath to an end.
Moving to the weekly CFTC COT report, whilst the net longs have fallen this week from 49,000 to just over 41,000, this data has yet to reflect the heavy shift in sentiment, and no doubt next week’s data will show a more significant move in the futures.
Given the strength of momentum now clearly evident in the move lower, any pause point or reversal, will first require significant stopping volume on the chart, coupled with narrow spread price action, and a congestion phase. Next week’s RBA meeting minutes due for release on Tuesday, may set the tone, given the lack of any other significant news items, so perhaps a calmer week in prospect for the pair.
By Anna Coulling