AUD/USD kept falling during the European morning

AUD/USD

• The dollar traded mixed against its G10 peers during the European morning Monday. It was higher against AUD, JPY, CHF, NZD and NOK, in that order, while it was stable vs EUR, GBP and CAD. The greenback was lower only against SEK.

• The euro was stable after all of the German regional CPIs accelerated on a yoy basis. These figures indicate that the national inflation rate, due out late this afternoon, is likely to turn positive. The data add to the growing body of evidence that Germany’s economy, the bloc’s largest, is strengthening again. This also increases the likelihood that Tuesday’s Eurozone CPI is likely to show that deflation moderated somewhat in March, which could support EUR temporarily.

• Despite the lack of data or news from Australia, AUD continued its slide after failing to hold above 0.7900 in the previous week. Overnight, Australia’s private sector credit for February is to be released. Loans to the housing sector will be closely watched, as the risks in the housing and mortgage market are monitored by the RBA. The recent rate cut could boost further prices and prompt the Bank to take additional measures to cool down the market, perhaps even delay another possible rate cut. Currently the market has priced in a 65% probability of a 25bps rate cut at April’s meeting. If loans have increased significantly this could hint at a delay in the rate cut and push AUD/USD a bit up again. Otherwise, AUD is likely to weaken further, in my view.

• AUD/USD kept falling during the European morning Monday, but the tumble was halted at 0.7680 (S1). Based on our momentum signs, I would expect the down leg to extend lower, perhaps for a test of the key support line of 0.7610 (S2). The RSI continued lower after falling below 50, and now stands near its 30 barrier, while the MACD lies below both its signal and zero lines, pointing south. Although I would expect the recent short-term decline to continue, I hold my neutral view as far as the overall outlook is concerned. First, the rate has been oscillating between 0.7610 (S2) and 0.7900 (R3) since the end of January. It traded slightly outside of that range for a very short amount of time. Second, AUD/USD is still trading above the downtrend line taken from back the peak of the 5th of September, and third, there is still positive divergence between our daily momentum indicators and the price action.

• Support: 0.7680 (S1), 0.7610 (S2), 0.7560 (S3).

• Resistance: 0.7760 (R1), 0.7800 (R2), 0.7900 (R3).