Currency Analyst since 2010

AUD/USD: hammered by fundamentals

By Mark Jensen

AUD/USD slid to the levels below $0.9300. There were technical reasons for the move like lower oscillators and the pattern at the weekly chart. The fundamental driver was the Reserve Bank of Australia’s meeting minutes: the RBA said that despite the better labor market data, there’s a lot of spare capacity, and noted that overall growth in coming quarters was likely to be below trend. Such comments reduce the expectation of rate hikes and, consequently, are negative for AUD. The RBA Assistant Governor Debelle tried to talk Aussie down saying that “lower capital inflows may result in a lower Australian dollar”.

In addition, there was a message overnight that Standard & Poor’s has warned Australia’s AAA credit rating could be reviewed unless significant cuts are made to the budget. Later though S&P clarified that there is a ‘less than 1-in-3 chance’ of this happening, though the sheer appearance of this topic has worsened the AUD sentiment.

In the next few days AUD/USD will be driven by the global dynamics and risk sentiment. As for the economic data, there will be no serious catalysts until Chinese HSBC PMI on Thursday.

Finally, I’ll give you some technical thoughts. AUD/USD approached support of $0.9265 (top of the daily Ichimoku Cloud). If this support fails, the pair will be vulnerable for a slide to $0.9200 – at this point such scenario looks quite likely. Resistance is at $0.9350 and $0.9400.

Chart. Daily AUD/USD

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