Trading Outlook – AUD/USD

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Originally updated: 07:20

Trading Bias: SHORT

Currency pair: AUD/USD

Current Sentiment: Bearish

In today’s trading session we will be focussing on selling opportunities on the AUD/USD.

Fundamentals:

With the recent cuts failing to have the real impact in driving the currency lower calls for an additional rate cut have been getting stronger, with Deutsche Bank and JP Morgan joining a host of economists who are expecting a 25bps cut at the meeting on the 3rd March. This is despite the RBA’s post cut commentary which was that they were not considering further adjustments to monetary policy – since then Australia has maintained a pattern of negative data. However the AUD has continued to show resilience across FX markets mainly driven from speculation that the PBoC could soon introduce stimulus which would of course boost the AUD as China is Australia’s primary trading partner and requires Australian commodities to fuel their manufacturing sector, therefore any Chinese stimulus would drive the demand for Australian commodities.
The current sentiment regarding the potential for further RBA cuts outweighs the sentiment regarding the potential for Chinese (where of course the thought the markets thought process is more convoluted) as such we can look to take some pips from selling the AUD leading up to the RBA’s next rate statement as speculation continues to mount.

In addition to the above we have a host of US data today including FOMC Member Fischer Speaking, who commented yesterday that the Fed are not concerned by current USD strength and are still on track with their plans for monetary policy.

Technicals:

We expect this pair to sell off during today’s session.

There is strong resistance at 0.7850 – 0.7880 which could provide trading opportunities should the price pull back. Look for the price to bounce off this level if it retraces back to it.

Remember to be aware of intra-day news as this can very often change the sentiment which makes our trade weaker. Look for any news that could be positive for this pair, which would change the sentiment to bullish.

Other Market Moving News:

On today’s calendar we have the release of German CPI, US GDP, Chicago PMI, Pending Home Sales and University of Michigan, as well as a host of Fed speakers.

Overnight release of a host of key data out of Japan and ANZ business confidence out of New Zealand failed to inspire any major reaction in the market and major pairs continued to hold within the ranges seen throughout yesterdays session.

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