AUD/USD Tests 2015 Lows as MACD Generates Sell Signal

The AUD/USD has been dragged by the AUD/JPY which has also logged a six-week low at 91.34, and the crosses fifth consecutive down day. AUD/USD has clocked a two-week low at 0.7596. The dollar has gain traction ahead of this week’s PMI data and Friday’s US payroll report. With commodity prices continuing to face headwinds a rate cut by the RBA in May is highly likely.

On Sunday, March 29, 2015 the Peoples Bank of China jumped back into the fray, focusing on inflation expectations and preparing market participants for a future central bank monetary policy move. This in turn has a negative effect on the performance of the Australian dollar. China’s central bank governor Zhou Xiaochuan reiterated that policy makers in China need to carefully watch for signs of deflation.

With this recent comment as a backdrop, it appears that the PBOC has dismissed the recent uptick in the Consumer Price Index which increased to 1.4% in February from a 5-year low of 0.8% in January. PBOC monetary policy member Qian Yingyi seems to believe that this anomaly is likely a function of recording data around the Lunar New Year. Wholesale prices on the other hand dropped to 4.8% in February the largest decline in 6-years.

Looking ahead this week the AUD calendar is relatively light. In the US, Markit manufacturing and ISM manufacturing are out later in the week, with the latter seen slipping to 52.5 in March from 52.9, while construction spending may rise 0.5% in February vs -1.1%. The February trade deficit scheduled for Thursday is forecast to narrow to -$41 billion from -$41.8 billion, while jobless claims may rebound 10k to 292k for the March 21 week. Factory goods orders are set for a 0.5% fall in February vs -0.2%.

The AUD/USD is testing the lows of 2015, while momentum has turned negative. The MACD (moving average convergence divergence) index generated a sell signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The index moved from positive to negative territory confirming the sell signal.

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