The Reserve Bank of Australia (RBA), governed by Glenn Stevens will meet on Tuesday’s (9/4) Asian session (12:30AM EDT). Financial presses and analysts have mostly been in consensus that the central bank will leave the overnight exchange rate (OCR) at 3.50%. However, many believe that there is a cut looming toward the end of this year. The recent tepid data from China also help build the case for this dovish scenario.
The market appears to have already been pricing in this expectation of not tomorrow, but an eventual rate cut in 2012. Therefore, tomorrow’s RBA statement could be highly scrutinized for how hawkish/dovish it is. Assessment that it is becoming more dovish will confirm the bearish outlook for AUD, and can further pressure the Aussie.
Let’s take a look at the AUD-crosses and see if there are room for further AUD-negative extension if the RBA meeting indeed sounds dovish.
AUD/USD daily chart 9/3/2012 2:35PM EDT
The daily chart shows AUD/USD in a short to medium term bearish trend since hitting a high of 1.0612 on 8/9. The pair has since slid below a rising channel support, and is now sitting on top of 38.2% retracement and a previous support pivot int he 1.0220-1.0230 area. It should be noted that this market is not bearish in the daily chart, but maybe so in the 4H and 1H charts.
Instead it is sideways, with market trading around the 200-Day SMA, which is a more or less neutral level for a sideways market. More evidence of RBA cut later this year, or even a surprise cut today, has a chance to push AUD/USD lower toward 1.01 (50% retracement and previous support pivot), then the 0.9980-1.0 area (61.8% retracement and previous support pivot, as well as psychological level of 1.0).
AUD/JPY daily chart 9/3/2012 2:44PM EDT
In a similar vein as the AUD/USD, AUD/JPY has broken below some key levels. It appears to be ahead of the AUD/USD, and technically more bearish. The next support zone is between the 79.05(50% retracement) and the 79.50 support pivot. This support area will require a strong market reaction to push through, opening up the 79.00 (61.8% retracement) level, and really, exposing the 74.55 low.
EUR/AUD Daily Chart 9/3/2012 2:52PM EDT
A look at EUR/AUD, and we a market that is establishing some bullish momentum, after a 50% retracement of the mid-May through July bear run, at 1.2317. The rally has been very sharp, and may be a bit overbought in the short-term. However, if the RBA can provide fuel, there is still upside toward 1.2485, 61.8% retracement and near the 200-day SMA.
While the medium term outlook can remain bullish, it should be noted that the EUR/AUD has been in a long-term bearish mode going back to the end of 2008. After consolidating at the end of 2010 and first half of 2011, EUR/AUD then fell from 1.4245 area, down to 1.1605, a record low. The medium term bullish outlook meets a declining resistance from this long-term bearish outlook probably around 1.27-1.2724(78.6% retracement) of this year’s bear run.
AUD/CAD daily chart 9/3/2012 2:57PM EDT
You won’t find “waterfall” under conventional chart pattern literature, but it should be coined, for price action such as AUD/CAD’s since the beginning of August. The daily chart shows the sharp decline from 1.0598 down to the 1.0090-1.0100 area (78.6% retracement and previous resistance pivot). This market is very bearish and has its eye on 0.9955 especially with a dovish RBA statement. The 0.9915-0.9955 area is a major support area for a sideways AUD/CAD when looking at the market in the weekly chart below:
You get the idea. As you can see, many AUD-crosses still have room for further Aussie-weakness with a dovish RBA, and pending rate cut this year.
Trade safe, trade well.