• Add

AUD/USD lacks direction near 0.7670 ; Australia's 25 years of prosperity at risk

AG Markets

Currently, AUD/USD is trading at 0.7672, marginally up +0.05% or 3-pips on the day, having posted a daily high at 0.7690 and low at 0.7659.

On the data front, the US economic docket has nothing to offer today due to holidays. However, the Aussie approaches another 'Do or Die' moment as market participants align up their trading stations when the RBA minutes hit the most important wires almost 10-hours from now. Evidently, any dovish rhetoric could suffice to initiate a short-term sell-off towards the critical 0.7615-10 support.

Lowe's words could be far from the truth

"It's difficult to know if the Australian dollar is too high or overvalued," shared with the press a week ago, RBA's governor Philip Lowe. Nevertheless, there are a few publications that profoundly disagree with the governor's comments including but not limited to the IMF; but what are others accounting that Lowe's words do not reflect?

Michael Janda, the business reporter at ABC News AU, wrote about the risks that threat the once booming Australian economy - let's go over 2 out of 10 - "Mining investment bust continues: The same risk of rising unemployment and underemployment applies to mining investment. The Reserve Bank recently estimated that at least three-quarters of the decline in mining-related construction work have passed. But well-respected private economic consultancy BIS Shrapnel reckons Australia is only about halfway through the resources investment downturn. The difference in estimates is worth tens of billions of dollars and tens of thousands of jobs."

Finally, Janda further writes, "Property price fall: With banks likely to be under even more pressure to uphold higher lending standards and global interest rates on the rise, plus new taxes on foreign buyers and a Chinese crackdown on money leaving the country, 2017 is likely to see a definitive decline in investor demand. Declining demand, increasing supply and an already expensive product sounds like a pretty good recipe for prices to start falling at some point later this year, which is certainly what many analysts expect. And if you think Australian property prices never fall, just ask someone in Perth or Darwin."

AUD: Data support further front-end outperformance – BNPP

Historical data available for traders and investors indicates during the last 8-weeks that AUD/USD pair, a commodity-linked currency, had the best trading day at +1.18% (Jan.17) or 89-pips, and the worst at -0.81% (Jan.18) or (61)-pips. Furthermore, the US 10yr treasury yields fell on Friday from 2.46% to 2.41%, down -1.31% on the day or -0.0320, during last week's trading session it went as low as -1.82%.

Technical levels to consider

In terms of technical levels, upside barriers are aligned at 0.7731 (high Feb.16), then at 0.7777 (high Nov.8) and above that at 0.7834 (high April.21). While supports are aligned at 0.7617 (low Feb.14), later at 0.7512 (100-DMA) and below that at 0.7459 (50-DMA). On the other hand, Stochastic Oscillator (5,3,3) seems to head south. Therefore, there is evidence to expect further Aussie losses in the near term.

On the long term view, if 0.7834 (high April 2016) is in fact, a relevant top, then the upside is limited at 0.7809 (short-term 38.2% Fib). Furthermore, if the RBA has 'no ammo' nor solid reasons to increase rates in 2017, the interest rate advantage should decrease organically as the Federal Reserve continues increasing rates with 3-hikes in the next 16-months. To the downside, supports are aligned at 0.7433 (short-term 23.6% Fib), later at 0.7182 (reverse long-term 61.8% Fib) and below that back to 0.6826 (low Jan.2016).

AG Markets Review

Source: https://www.ag-markets.com/news/
!"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGHIJKLMNOPQRSTUVWXYZ[\]^_`abcdefghijklmnopqrstuvwxyz{|} !"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGHIJKLMNOPQRSTUVWXYZ[\]^_`abcdefghijklmnopqrstuvwxyz{|}