The Australian dollar continued its journey south, retreating from the highs and finding a new and low base just above 0.72.
News from China were the main driver once again.
After China reported another huge drop in imports on Tuesday, the economic giant on which Australia relies released inflation figures: producer prices dropped by 5.9% y/y.
This shows weakness but was expected. The disappointment came from consumer prices: headline CPI rose only 1.6% y/y, down from 2% last time and below 1.8% expected.
While the news also raises the prospects of more easing from the world’s No. 2 economy, it also reflects the slowdown and this isn’t good for imports coming from the land down under.
In addition, Westpac, one of Australia’s largest banks, announced that from November 20th, the rates on home loans will increase by 0.2%. The commercial bank aims to meet the new measures set by the Australian Prudential Regulatory Authority. The other 3 major banks in Australia’s “big four” are expected to follow suit.
So if the largest banks raise rates due to regulatory requirements, the central bank could tackle this exact issue and cut rates. This is yet another factor weighing on the A$.
AUD/USD
The Aussie dollar is trading at around 0.7220 at the time of writing, after losing the 0.7277 line that was the post-Fed high in mid September. The round level of 0.72 provides support, with 0.7175 following suit.
Below 0.72, there is little support until 0.71, followed by 0.7040 and the very round 0.70 level. On the upside, 0.7277 turns into resistance.
Tomorrow we have the big release of employment data in Australia. See how to trade the Australian employment change with AUDUSD.
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