Data from Australia has been supportive of a rate cut expectation, with Monday’s domestic data no different. Retail sales came in at 0.0% in Oct, missing consensus forecast of 0.4%. This figure was also lower than all the analysts forecast polled by Reuters (0.1% – 0.8%), but more importantly it flew against RBA’s own internal expectations which stated that retail spending rose in the month of Oct.
5 Minutes Chart
Better than expected HSBC Manufacturing PMI data supported Aussie, but was unable to push price back to last Friday’s range. In comparison, we’ve seen EUR/USD jumped around 30 pips higher on the same HSBC announcement. Coupled with the fact that AUD has historically been much more sensitive to Chinese data, it seems that we are not looking at many willing buyers for Aussie right now.
Currently, futures market is pricing in about 90% chance of a 25bps cut by RBA. Should such a move happened, we could see AUD/USD falling further, but follow through could be limited noting how bearish AUD/USD has already become in the face of risk rallies. On the flip side, should RBA surprise by holding rate steady, we could see bulls entering back into Aussie, with previous swing high close to 1.05 coming back into focus.
4 Hourly Chart
From a technical perspective, 23.6% Fib retracement (1.0145 low vs 1.049 high) can potentially act as support, whilst a break below (could be due to RBA cut) may find support along 38.2% Fib and also Channel Bottom. A confirmation of 23.6% support holding may coincide with a bullish breakout of Channel Top (if it happens around 5-6 candles later – around the same time as RBA announcement), which will add additional bullish bias for Aussie.