AUD/USD – Headed Back to 71 Cents

AUD/USD – Headed Back to 71 Cents

AUD/USD – Headed Back to 71 Cents

We have strong reasons to believe that AUD/USD is headed back to 71 cents. Despite the upside surprise in GDP, no one will argue that the Chinese economy is slowing. According to the recent decline in jobs and slower service sector activity, Australia itself is hobbling along. The RBA who meets next month won’t be happy that its currency rose as much as 5 cents from its September lows and that Westpac, one of the country’s largest banks raised mortgage rates. As such, there’s growing belief that the central bank could lower interest rates next month. We don’t think they will but market expectations and the possibility of dovish comments should take the currency below 72 and towards 71 cents. There are no major U.S. economic reports this week and no news could be good news for the greenback.

Technically, recent gains in AUD/USD stopped short of the 100-day SMA and now the currency pair has fallen out of the buy zone as defined by our Double Bollinger Bands. There is near term support at 72 cents but the more significant support level is at 70 cents. A close above 0.7425 would be needed to negate the downtrend.

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