Australian Westpec Consumer Confidence index jumped 7.7% to 108.3, vs a previous reading of 100.6. This gain agrees with the NAB Consumer Confidence figures which was released yesterday, showing similar improvement in consumer sentiment. Both consumer sentiment indicators results are surprising considering the weaker Retail Sales and also labor market, suggesting that things on the ground may not be as dire despite what some of the economic indicators are showing. Perhaps talks of “hard landing” for Australia is overly exaggerated, as Australia’s economy has been punching above its weight in recent years post 2007 financial crisis and we’re simply looking at a normalization of Australia’s fundamentals.
Market currently is pricing in a 44% probability for an RBA rate cut in Mar, sharply lower than the 55% on previous day. If the general populace is happy, there is little reason for RBA to cheer them up.
Hourly Chart shows huge gain in AUD/USD after the news release, with price holding onto 1.03 firmly and looking to test 1.035. It is important to note that 1.03 was looking certain to hold even before the news came in, suggesting that inherent bullishness is in the cards. Furthermore, price has shrugged off Stochastic readings which was threatening to issue a sell signal which would have been in conjunction with a break of 1.03 support. Bears will be devastated that the scenario did not pan out the way they wanted, further weakening bearish sentiments from here on.
12 Hourly Chart
From a longer perspective, 1.035 remain a strong ceiling and current bearish momentum (from 1.06 high just before Jan 14) not yet invalidated. A confirmation of 1.035 ceiling broken would bring 1.045 and and eventually 1.06 into focus. The bulls are facing the same issue as bears did on the hourly chart. Stochastic reading has shown a Buy Signal with a Signal/Stoch cross with readings above 20.0 after entering the Oversold region. This in itself is a bullish sign, but failure to break 1.035 on such bullish indication would backfire and result in further bearishness as bulls that enter early would have been burnt.
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