AUDUSD - watch out for an RBA cut
The AUD really is a safe harbour in this world of moribund economic growth - at least against the US dollar anyway
Yesterday's support at 1.0390 and overall performance was truly remarkable given the raft of weak data that flowed in Australia. Whether it was retails sales, the AIG Performance of manufacturing index, ANZ Job Ads, house prices or TD Monthly inflation data it didn't matter as they all showed a picture of an economy slowing with no real price pressures and the need for more monetary stimulus from the RBA to buttress the non-mining sector of the economy.
It is interesting to ponder why the AUD might have been so resilient.
Clearly a large part of it is the fact that the US dollar was weaker because the the Aussie lost ground against the EUR, JPY, NZD, GBP and SGD and on that basis it is clear that the Aussie wasn't that strong at all.
As you can see in the chart above even if the RBA cuts rates to 3% today which is the modern banking and GFC low for the official cash rate Australia will still have a substantial buffer over the other big developed currency market pairs which will go a long way to buttressing the AUD and providing enduring support. At some point there will be a tip or a tipping point but it is my feeling that unless rates hit 2.5% and are seen to be heading below there (which would require a much weaker domestic or global economic outlook then we or the market currently expect) then the Aussie will remain well supporrted, at least against the USD.
As you can see in the 4 hour chart above the Aussie is in a little downtrend channel and is slowly sinking lower. It feels like the FX market might be betting that the RBA doesn't cut which is clearly a greater than zero probability given the recent rhetoric and speeches from Martin Place. I am however targeting a move toward 1.0345/50.
EURAUD - broken finally
As we noted yesterday our trend following system is long EURAUD and it had a sharp move higher overnight as the EUR finally broke and held above 1.30 against the US dollar.
EURAUD has now broken the couple of month down trend also the 61.8% retracement of the October - November sell off. It now looks biased back toward 1.27 and is potentially going to be driven by the slide in the AUDUSD as noted above.
AUDJPY - topping pattern
Like the USDJPY AUDJPY looks like it is topping or building momentum for a break higher. Only time will tell but I favour being short AUDJPY unless or until the AUDJPY recent high breaks by 13 points.
As you can see in the chart above the AUDJPY has had a fairly robust range for the best part of 7 trading days now and only a break of either side will kick this cross further.
AUDNZD - nowhere man
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