The Australian Dollar is on the back-foot once again, unable to sustain its recent gains as the market liquidated longs in response to a disappointing Australian Q3 GDP. Sellers are now in control of the price ahead of the US NFP.
As Valeria Bednarik, Chief Analyst at FXStreet, reports: "The economy grew 0.6% in the third quarter, missing market's expectations of 0.7%, while the annual rate stood at 2.8%, below forecasts for 3% growth. The slower rate of growth was attributed to consumer spending advancing at its slowest pace since 2008, which means that RBA's hands will remain tied for longer."
Looking at the state of valuations, from a daily perspective, the depressed levels in the Aus vs US 10yr yield spread, last at 0.175%, somehow justifies that sentiment towards the Australian Dollar dissipated. The yield curve between the two countries, however, is far from supporting sustained losses, as it holds around the 0% (when discounting the 10y-2y); that said, it is starting to retreat, having broken the last base, which may increase the interest to sell on rallies.
Reading at the daily tick accumulation to gauge how much volume existed, the bearish candle formation was on low volume, suggesting that the setback in the Aussie didn't have a great deal of selling commitment, judging by vol average standards in this market. Hwever, judging by the close of the daily candle in NY, the lack of profit--taking is a sign that an immediate attack towards recent trend lows is on the cards.
As per technicals and levels, the 20-hourly MA crossed the 200-hourly MA on the release of the Aus Q3 GDP miss, communicating that sellers have now the upper hand, for an expected move to 0.7560, which is precisely where the rate landed. The next key support is found between 0.7550 mid-round number, which should attract bids given the buoyant yield curve, ahead of 0.7530, Nov 20 lows, and ahead of 0.75 psychological barrier. On the upside, buyers have to take control by lifting prices and accept them above 0.7580, which coincides with todays daily pivot; such scenario would potentially lead to 0.76 as next key target, where large offers are expected to rest. Note, all short-term technical studies should be thrown out of the window in 24h when the US NFP is release.
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