Matt Simpson, CFTe, MSTA
CityIndex
I suspect we have either finished (or very close to completing) the correction lower before we see a resumption of the bullish daily trend
Over the past few sessions we have seen a decline in volume, which would usually add weight to the declines being a retracement, but this was also over a holiday period so I would expect lower volume anyway. Putting that aside I am satisfied we have seen the swing low and for a resumption of the uptrend to resume.
Asia trading today saw an upside break of a bullish wedge, which projects an approximate target around the base at 0.945. We still have 6x trading days in the month remaining so 0.94 is just an initial target, with the base of the wedge trading around 0.945 at the tip of the Shooting Star Reversal.
COTS report show that 'Large Specs' are still Net long for a 2nd consecutive and increasing (as of Tuesday last week).
CPI y/y is forecast at 3.2%, above 2.7% last release. A number 3.1% or below should see the A$ stumble whereas a positive reading at 3.2% or above should see further A$ appreciation. We also have the CPI q/q forecast at 0.8% so if we see 0.8% or higher along with 3.2%+ y/y CPI then it should add fuel to the bullish fire.
Also interesting to note is the comments from Australian Government not being happy with RBA's neutral stance, stating the higher exchange rate is causing issues regarding the budgets and recovery.
Events to monitor
- CPI y/y and q/q
- HSBC Chinese Flash PMI
- US Housing and Employment data
- Interaction between RBA and Australian government over the A$ being 'above historical standard
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