Mingze Wu | Jul 12, 2013 07:16AM ET
So the bears have spoken – AUD/USD tanked spectacularly after hitting the 0.93 resistance yesterday. Price rallied from the low of 0.910 due to Bernanke’s dovish talk on Wednesday, which sent USD weaker and AUD/USD much higher. However, it is clear that USD weakness is no match for bearish sentiment surrounding AUD, with expectations for RBA rate cut in August increasing by the day. Today added further scope for potential RBA rate cut, with the latest Home Loans data coming in at 1.8% vs an expected 2.2%, suggesting that the housing market will have a lower risk of bubbling should RBA cut rate again. Not that RBA will need this extra scope, as they have been repeating ad nauseam in every single rate meeting that current inflation rate/expectation allow RBA to cut rates if they wanted to.
Some may say that the decline yesterday was due to the strengthening of USD following strong showing of US stocks which led to record S&P 500 close. That is only partially accurate though, as it is clear that bearish sentiment in AUD is stronger than other risk currencies when we look at EUR/USD and GBP/USD, where the pullback wasn’t as strong as AUD/USD, with price barely giving up 50% of the gains made post FOMC minutes. The fact that the huge turnaround started from 0.93 significant resistance suggest that there are huge predatory bears looking for good opportunities to sell at key price points, with the rest of the opportunistic speculators helping to push price lower to where we are now.
Hourly Chart
Currently, we are being supported by the intraday support of 0.913. Given the strong bearish pressure that was described above, and the fact that stochastic readings are still above the Oversold region, it is possible that price may be able to break the weak intraday support to find stronger support around 0.910 and potentially the descending trendline.
Daily Chart
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