- AUD/USD is currently trading at 0.7022 with a low of 0.7019 and a high of 0.7051.
- The pair has reached a techncial crossroads in a risk-off environment.
The Aussie is very fragile following the poor GDP report, with more bears getting involved in the rate cut chorus. The futures markets are pricing in an RBA easing bias by as early as Q4 2019. However, the RBA is not alone in turning more dovish and the ECB is a testament to that.
- EUR/USD to target 1.1000 once divergence between Fed and ECB kicks in – ING
The greenback is catching a bid on the Central Bank divergences, like the Fed, although in neutral, can look to hike rates if the economy continues to expand which is a weight on EM-FX, commodity-FX and risk appetite.
“This week we did see another RBA policy statement and hear again from Governor Lowe in his enlightening speech on the housing market’s impact on the economy,” analysts at Westpac explained.
“After mostly soft partial data, many forecasters had joined Westpac in looking for a weak 0.2%qtr rise in GDP. As the chart shows, after a strong H1 2018, the economy slowed sharply. There was also considerable (and justifiable) media attention on the consecutive quarters of contraction in GDP per capita.”
USD has risen against all G10 FX this week
Westpac expects that by the Aug SoMP, the RBA will be forecasting GDP growth of below the 2.75% trend pace and thus will deliver the first of 2 cash rate cuts this year. ” Little wonder the USD has risen against all G10 FX this week, with markets pricing more dovish outlooks for AUD, CAD, EUR”¦the list goes on.”
AUD/USD is trending along a downward slope in an interesting techncial picture, with a descending wedge and H&S on the 4HR charts, a steep bear channel on the hourly, capped on upside attempts by the daily trendline support and stuck in a monthly range of between 0.7020 (or 0.6707 if including the flash crash lows) and 0.7400.
AUD/USD has come to a crossroads made up of 2019 support lines. We have the descending support from the 7th and 24th Jan neckline that meets 11th and today’s lows at 0.7020 (horizontal support from Oct 2018 lows). A break there opens the risk of a major sell-off to 0.6820 and Jan 2016 lows. A break back above 0.7050 and then 0.7080 opens risk back towards the 38.2% Fibo of Jan 2019 decline to flash crash lows around 0.7270 and the top of the H&S just below the 0.73 figure.