Aussie May Rise to 4-Month High: Technical Analysis

The Australian dollar may extend this month’s rally to the highest level since March, UBS AG said, citing trading patterns.

The so-called Aussie may climb a further 1.4 percent to the $1.0558 level reached March 27 after its moving average convergence/divergence held above zero, according to Richard Adcock, London-based head of fixed-income technical strategy at UBS. The move would become more likely if other momentum indicators such as the stochastic oscillator add to signs of strength, he wrote in a note to clients yesterday.

“As the MACD is above its zero line reflecting a bullish condition, we’re watching for momentum tools to cross higher to signal resumption of strength,” Adcock wrote. “Such a signal will develop on a close above $1.0350, to suggest a break of the $1.0444/78 resistance, opening the door” to the March 27 level.

The Australian dollar added 0.1 percent to $1.0412 as of 1:13 p.m. in Sydney from the close in New York yesterday. It fell to as low as $1.0177 on July 25, the weakest since July 13. Investors should buy the Aussie at a close above $1.0350, targeting $1.0550 with a stop-loss order at $1.0170, Adcock said. A stop loss is a preset instruction to exit a trade at a certain level in case a bet goes the wrong way.

MACD is a gauge of momentum and is calculated by subtracting the 26-day exponential moving average from the 12- day average. The signal line is a nine-day exponential moving average of the MACD, and provides buy and sell signals. A stochastic oscillator chart measures the closing price of a security relative to its highs and lows during a particular period to try to predict whether it will rise or fall.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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