AUD/USD: sell on a break of $0.8900
Kira Iukhtenko, FX BAZOOKA analyst
Australian dollar extends the downside on Thursday, sliding towards the key $0.8900 support. The pair has found temporary support at this mark. The main reason for Aussie’s weakness was the unexpected drop in Australia Q4 capital expenditure (-5.2% vs. prior +3.6%).
We see a good chance to sell the pair on a break below $0.8900 support (sell orders clustered there) with an initial target of $0.8860. From a technical viewpoint, decline below the $0.8930 support is an important bearish signal. The pair seems to have formed a triple top pattern (H4). We need to recover above the $0.8930/40 resistance area to negate the bearish view.
UBS strategists see the recent AUD recovery as temporary. They expect iron ore prices to decline in Q2 due to an increasing supply from Australia and larger inventories in Chinese ports. “To us, that means downside risks remain and we stand over our 3-month AUD/USD forecast of $0.8600 and our end-2014 forecast of $0.8500”, analysts concluded.
Chart. H4 EUR/USD