AUD lower, eyeing possible RBA March cut

It was all about the US$ today (and WTI, which fell 5.5%), and after several weeks of consolidation it took off once the US got in, following some  hawkish comments from the Fed's Bullard/Williams, and closely followed by some solid Durable Goods data which sent US bond yields soaring. Another busy session looks to be in store today and if the provisional US Q4 GDP backs up the DG data, then the dollar is going to head towards new trend highs against many of its counterparts, with the Euro looking particularly vulnerable. Elsewhere today, there is a lot of data out of Japan, headed by the CPI and Unemployment. Australia gets New Home Sales, Private Sector Credit while NZ has the Building Permits coming up shortly. Later on  sees German CPI, US GDP, Chicago Purchasing Managers Index, Pending Home Sales, Rts/ Michigan Consumer Sentiment Index, Personal Consumption. It will be a busy weekend session. Have a good one!

 

After the selloff in the Aud following yesterday’s disappointing Capex data, it unbelievably rose to new highs in Europe, reaching 0.7912, presumably on the stories of the chance of a near term Chinese rate cut. It did not stay there very long and only gave the sell orders above 0.7900 a chance to get set, before falling sharply as US$ strength overwhelmed all its counterparts and currently sits at session lows at 0.7788.

 

With the focus now squarely on next week’s RBA meeting, the capability of the Aud to regain any ground may depend on the ability of the market to brush aside the data and I suspect that it will continue to feel the heat as we head towards next Tuesday, but with any interim action to be decided by the whims of the US$. With the US Fed now seen as being slightly more dovish than previously (not including today's more hawkish Fed comments), analysts are beginning to feel that the RBA could cut rates next week without fear of criticism of doing so, while at the same time the Fed are about to begin hiking rates.

 

Technically the Aud has taken out plenty of support levels and looks headed to the base of the short term channel at 0.7765. A break of this would see further bids at last Thursday’s low at 0.7756 below which could head back to Tuesday’s brief low, at 0.7740, seen immediately after the release of the RBA Minutes. Below there, 0.7720/25 will be the next support ahead of 0.7700, a break of which would then head to minor support at 0.7665/70 and possibly on to last Thursday’s session low of 0.7643 and the trend low at 0.7625.

 

The topside is going to find trouble now above 0.7800 where sellers will be seen at the 200/100 HMA’s at 0.7815/0.7830. With the short term indicators pointing lower, I would be looking to sell into strength, with a SL placed above today’s 0.7912 high.

 

Economic data highlights will include:

 

New Home Sales, Private Sector Credit

 

Jim Langlands

FX Charts

www.fxchartsdaily.com