Currency Analyst since 2010

AUD looks bad even without RBA's cut

   Elizaveta Belugina

AUD/USD has hit new minimums since 2009 this week as it fell to 0.7560. The pair remains inside the downtrend channel from August 2014 eyeing the major Fibonacci retracement level at 0.7200.

At the same time, a wider channel of 2013-2014 in technically in place, and Aussie has hit its bottom. Bullish divergence is seen at the daily chart. However, it might be very difficult for the pair to recover. Previous support levels and the 200-month MA at 0.7795 are acting as resistance.

The Reserve Bank of Australia has left interest rate unchanged this month. The RBA has its hands tied because by further lowering of the interest rate risks inflating the nation’s housing bubble. Aussie home values rose by 18% since the start of 2013. This creates severe risks for Australian banking and financial systems.

However, it’s clear that Australian central bank wants to see AUD lower: despite the decline the unemployment rate remain high, commodity prices are still low and Chinese data keep disappointing. Earlier the RBA’s Governor Glenn Stevens mentioned the 0.7500 level as fair. As the US Federal Reserve is expected to raise interest rates rather soon, it probably won’t be hard for the RBA to pull Aussie down with some stealth interventions.

As a result, we still favor short positions on AUD/USD.

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