AUD/USD: 0.9895The reaction to the budget has been pretty negative with plenty of commentators questioning the accuracy of the numbers, particularly the ability to return to surplus within the next three years and the prediction that the terms of trade will deteriorate only slightly.
The market pretty quickly showed what it thought of it and has taken the Aud to a low, so far, of 0.9876, and the losses would probably have been deeper if the ratings agencies had not come out as supportive of the attempt to return to a surplus, in maintaining a stable outlook on the AAA credit rating.
So things are not looking very good for the Aud, on top of which the renewed US strength is adding further pressure. We have more or less reached our long term triangle target now and it may be worth squaring up for a session or two as the 4 hour charts are very oversold and we get a bit of a short covering bounce. If so though, it looks as if it will be pretty anaemic and further losses towards 0.9740 (76.4% of 0.9385/1.0860) will be on the cards. Below that, the radar will turn towards the 2012 low of 0.9582.
The topside will find sellers at around 0.9950 and again at parity, which is beginning to look a little distant, although the Aud has a bit of a history of seeing a sharp turnaround whenever it has been preceded by a selloff of the speed that we have seen over the last few days, so stay flexible down here.
Having for so long been looking for 0.9850, I will be squaring up down here for a day or so. Given the combination though, of the weak Aud and the generally stronger US$, it does look as though we can expect further losses in the medium term. We now have some commentators calling for a return to 0.8000, and today one analyst has even suggested that 0.6000 is on the cards. Sounds just like the good old days!
There is some secondary data out today which will provide some interest.
Economic data highlights will include:
WBC Consumer Confidence, New Car Sales, Wage Price Index
