AUD/USD has taken quite a beating today during early Asian trade, breaking 1.04 support even before RBA’s rate decision next Tuesday. Catalyst for the decline is the disappointing Chinese Manufacturing PMI which affected AUD far more than other “Risk Currencies” – EUR/USD and GBP/USD are trading higher, while NZD/USD trades slightly lower.
There is an acceleration of the bearish momentum with price breaking the declining trendline, as well as the 1.24 support subsequently within the same hour. Price is continuing its descend despite some uncertainty represented by the Doji candle following the initial breakout.
From the daily chart, we can see the degree of AUD/NZD weakness from how resistance 1.252 held, and how longer term support 1.237 – swing low of Oct 2012, broke so easily. Verdict is still out whether price will simply fall apart and crash to 1.216 – support of consolidation region back in 2010, as we could still see recovery back above 1.237 to establish trading within the 1.237 – 1.252 range, with interim resistance between 1.245 and 1.248.
Fundamentally, hawkish RBNZ will continue to pull AUD/NZD lower, and market’s expectation of RBA rate cuts will add more weight to the already heavy price curve. Even if RBA’s decision on Tuesday help push AUD higher, price action around 1.237 post announcement will give us clearer picture of whether bulls or bears are in charge in the near-term.
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