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RBA Governor Glenn Stevens said that AUD/USD should be closer to 0.75.  He also added that the Aussie is quite likely to be lower one year from now. While a rate card isn’t  imminent in the RBA’s next decision in February (as Stevens hinted), his words certainly caused a stir.

The  immediate reaction was a dip to new low of 0.8215, followed by a bounce to previous levels but it remains on the back foot.  The pair is trading around 0.8250 at the time of writing and could continue falling. Here are three reasons why:

  1. US dollar correction may be over: The greenback  rallied hard on the superb NFP on Friday and then was sold off quite sharply in the new week. Good news could not help the USD, especially during the New York sessions. But now, this may have changed. The beat in retail sales already has a positive impact on the dollar, and it may be resuming the larger trend.
  2. Session  reaction: The Aussie tends to move more during the Asian session, when traders in Sydney, Auckland, Tokyo, Shanghai and other Asian centers are active. His comments during the late European session had an impact, but still not a full one.
  3. Key Chinese data: The  upcoming session is not empty in terms of events: China, Australia’s No. 1 trading partner, releases industrial production data for November. This has become an important figure especially after the drop to 6.9% y/y growth in August. Since then it recovered back to higher levels of % in September and 7.7% in October.  These are are lower levels than seen beforehand. Another mediocre number (in Chinese terms) could remind us of economic slowdown. Less industrial output for China means less demand for Australian metals, and this could  exacerbate the Aussie’s situation.

The all-important support level of 0.8066 is already not that far away. Could the Aussie continue towards this figure?

More:  AUD Weakness To Be Front Loaded – Barclays