AUD Ready To Extend Losses This Week
Blackwell Global | Dec 20, 2016 12:17AM ET
Key Points:
- Recent Australian Unemployment Rate cause for concern.
- Technical and fundamental bias now aligned.
- Monitor the monetary policy meeting minutes going forward.
The Aussie dollar moved in step with most of the market last week, but US fundamentals aren’t entirely to blame, as Australia posted some weaker data, which has many speculators worried. As a result, the pair’s forecast remains somewhat bearish this week on both the fundamental and technical fronts. However, keep an eye out for any surprises in the economic news as they could help the embattled pair to regain a foothold.
Starting with what happened last week, as was the case across the market, the AUD had a rather strong start to the week as sentiment swung away from the USD and some bullish technicals came into play. However, as was to be expected in the wake of a hike in the FFR to 0.75%, Wednesday proved to be a turning point which sent the pair reeling for three straight sessions. However, an unexpected jump in the Australian Unemployment Rate to 5.7% in the latter half of the week also made its effects felt, leading to some severe losses for the pair.
On the technical front, the AUD broke below its recent trend line and also breached a long-term zone of support. As a result, we could now have some more downside potential on offer moving forward, especially given the strong bearish bias of the 12, 20, and 100 day moving averages. Furthermore, despite the large slide last week, the RSI refuses to stray from neutral territory which leaves the pair exposed to further selling pressure in the near-term.
As for the fundamentals in the week ahead, due to the recent contractionary quarterly GDP result and a second consecutive jump in the Unemployment rate, Australian economic news will be highly scrutinised. As a result, the RBA’s Monetary Policy Meeting Minutes will be in focus as traders look for any silver lining to the recent spate of poor fundamental data. On the US side of things, keep an eye on the Final GDP data which is due out later on in the week as a softer outcome could provide some much-needed buoyancy.
Ultimately, we probably haven’t seen the last of the post-FOMC fallout just yet and due to the relatively data-scarce week, the AUD is especially exposed to upticks in the US fundamentals. Furthermore, as mentioned above, the technical bias has also shifted towards bearish which will be compounding the effects of any stronger US data so stay on guard for continued slips as we march towards the holidays.
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