October 22, 2021 14:06:43

The aussie has been enjoying October as the commodity currency rally has reinvigorated the bulls. Improved risk sentiment is also supporting AUD, although RBA and Fed policy divergence may limit gains further out.

But markets seem to have factored in a lot of bad news and data. A substantial short position is still evident. In fact, AUD is the second largest single currency exposure for speculative investors. The slowing China recovery will be worth watching going forward with the assuie historically a strong China growth-proxy.

AUD bullish above September high at 0.7478

AUD has seen thirteen up days in the last seventeen since bottoming out around 0.7169/70 at the end of last month. The tight bullish channel remains intact, having pierced trendline resistance from the May highs. The weekly MACD turned positive earlier this week, so this suggests there is room for the recovery to extend further.

But the bulls have run into initial resistance at the halfway point (50%) of the May to August move around 0.75. This comes ahead of major resistance at the 200-day SMA at 0.7561.

If bulls can breach this barrier, the declining trendline at 0.7636 looms above. Otherwise, we may see some profit taking after such a strong run. The September high at 0.7478 should act as first support. The 100-day SMA is just below 0.74.