AUD/USD: 0.7332The US dollar came under some downside pressure on Tuesday after the soft US ISM Mfg figure, causing investors to question how the US Federal Reserve may react as we head towards the December FOMC Meeting. The AUD and the NZD were particularly strong and led the way higher. This could repeat itself today, with traders looking to a strong outcome from today’s Australian Q3 GDP figure following on from yesterday’s Current Account figure. On the other side of the coin, the RBA Governor, Stevens, will be speaking in early Asian trade and may take another opportunity to talk the Aud down. Later in the day, the focus will be on the EU CPI, the US ADP jobs figures and speeches from the Fed’s Yellen, Lockhart and Williams.
The RBA left rates unchanged yesterday although the AUDUSD had already reacted positively to the earlier, upbeat building permits and also to the export component of the current account balance. The Aud has continued its upward progress and has headed steadily higher through the remainder of the session, to currently sit just below the day’s peak of 0.7335, the highest levels since mid-October.
RBA Governor, Glenn Stevens will be speaking shortly on “Economic Conditions and Prospects” and then we get the Q3 GDP figure. A good number is expected, following yesterday's export figures, with the market looking for +0.7%qq, +2.3%yy (previous 0.2/2.0), which would most likely further underpin the Aud and send it on towards 0.7363 (15 Oct high) and then on to 0.7382 (12 Oct high & 38.2% of 0.8162/0.6900). Beyond there would put pressure on 0.7400 and possibly on 0.7438 (11 Aug high) and the 200 DMA at 0.7455.
The hourly charts suggest that some caution is required as they are reaching overbought extremes, so further short term upside momentum should begin to slow from here, and they may require a reversal before further gains are possible. If we do see a correction lower, the initial support will arrive at 0.7300 and then at 0.7282 (25 Nov high). Below this would then allow a revisit of 0.7259 (23.6% of 0.7015/0.7332), 0.7220(200 HMA) and 0.7212 (38.2%).
Although the hourlies are overbought the 4 hour indicators look positive. A strong GDP outcome would provide additional support and would possibly propel the Aud higher, although from a medium term perspective, if we see a run towards/above 0.7400 it may not be a bad area to look at selling into as we approach Janet Yellen’s testimony, due Thursday, and further out, as a December US rate hike looms.
Economic data highlights will include:
RBA’s Stevens Speech, GDP (Q3).
