Economic announcements this week are very influential on the Australian Dollar. On Tuesday, the Aussie sank to as low as 1.0154, following an interest rate cut by the Reserve Bank of Australia. While not entirely surprising, this decision was against the “average” of predictions, which called for no change. Instead, the OCR was lowered to 2.75%, which possibly set a downward bias for the AUD-USD and, by extension, all other Aussie crosses.
While the currency experienced some recovery in early Tuesday trading, on better than expected Chinese data, it faces a much tougher test on Thursday. The Unemployment Rate and the Employment Change are typically huge movers for the AUD and it should not be different this time. Analysts expect the Unemployment Rate to stay at 5.6%, while the Employment Change is set to show an improvement of 12 K, after the abysmal reading of negative 36 K a month ago. It is important to note that Chinese inflation numbers (CPI and PPI) will be released at the same and could create additional confusion and volatility.
As discussed earlier in the week, negative response today could start a major new trend in the AUD-USD. On the daily chart, the price has returned to the key support are of 1.0150. Should the price move lower after the announcement, especially if it happens with some authority, the next stop for this pair could be at 0.9500. Of course, this is speculative at this point, but the event is very important. On the other hand, if the AUD-USD finds support here, perhaps on positive news, the price could linger in the current consolidation area for much longer. With any luck, we will get some answers within next few hours.
We should not forget about the New Zealand Dollar, which is showing its own signs of weakness. Recently, the RBNZ admitted to intervening in the market, trying to limit the upside here. Even a cursory look at the chart suggests that the area of 0.86 in the NZD-USD struck a nerve with the central bank. Now the Kiwi is testing significant support at 0.8460. A decisive downside break below this level could signal a selloff down to the 0.80 handle.
Trade from early this week, the buy in the USD-CAD. The premise here was to go long after a bullish candlestick pattern, using the hourly chart. It happened soon after opening, with entry at 1.0075. While the price moved my way for the most of the way, it was doing it at a snail’s pace, making very little progress. In the end, I closed it for a gain of 12 pips late in the day. Result is not particularly impressive, but it was an “easy” trade, relatively predictable. Moreover, most other currency pairs were also lifeless on Monday, so from this perspective it was a decent trade, if minor in scope.
Mike K.