The Technical Outlook
Current resistance at 1.0450 is being reinforced by the longer term 1.0855-1.0602 descending trendline. The confluence of both levels will ensure that price action remains below the figure in the near term. Conversely, downside support at 1.0250 will likely keep bears in check. Although below current resistance at 1.0300 (200 moving average), the resistance barrier will draw from both the psychological figure and the 1.0217 38.2% fib support in bolstering short term price action. Technical oscillators are supportive of the rangebound scenario, dipping below extreme overbought territory.
Nonetheless, markets will be paying attention to Monday’s release of the Reserve Bank of Australia meeting minutes. Although we can pretty much expect to hear the central bank’s concerns over sluggish growth in China and the looming European fiscal crisis, it will be interesting to note any shift in opinions regarding the Australian economy. Hints have now emerged that things may not be as contractionary as previously expected. And, this could mean renewed fears over random hints of a rate reduction by policymakers. Currently, money markets are pricing in a 50%chance that the central bank will cut rates by 25 basis points.
Any reduction in the overnight cash rate will be bearish for the Aussie, likely prompting a break of the lower technical support figure.
Source: FXTrek Intellicharts