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AUD/USD – Headed for 77 Cents?
One of the weakest performing currencies on Monday was the Australian dollar. After selling off sharply at the end of last week, the selling continued despite the lack of US and Australian data. AUD spent most of the North American trading session in negative territory even though the USD struggled to rally. Tomorrow night we have Australian CPI numbers due or release and while the uptick in consumer inflation expectations suggest that price pressures increased, the forecast is very high. If CPI fails to rise by 0.8% or more and the year over year rate stays below 2%, we could see a correction in AUD/USD. Before then, we’re still looking for AUD to trade heavy. The USD on the other hand is holding strong as the market anticipates President Trump’s Fed pick and a House vote on the Budget Bill.
Technically, the outlook for AUD is very weak. The daily charts show a break below the 20-day and 100-day SMA while the weekly chart included in this note shows AUD/USD starting the week below the 20-week SMA. The 20-week SMA also coincides with the 23.6% Fibonacci retracement of the 2016 and 2017 rally AND the 23.6% Fib retracement of the 2011 to 2015 decline. Both charts show a potential move down to 77 cents and the potential for a steeper decline towards .7635.