Potential Top in AUD/USD? Not Yet.

Potential Top in AUD/USD? Not Yet.

Potential Top in AUD/USD? Not Yet.

The main focus tonight will be on the Australian dollar, which experienced its largest decline in more than a week. Softer retail sales numbers are to blame even though they were offset by a rise in job ads and building approvals. Aside from the trade balance and PMI services report, the Reserve Bank delivers its latest monetary policy decision this evening. No one expects the RBA to cut interest rates but there’s uncertainty around their comfort with recent moves in the currency. In the past, the RBA has said they prefer to see AUD/USD trading closer to 65 cents and has described it as overvalued near current levels but more recently we haven’t heard any specific concerns. Based on the table below, there’s been slightly more improvement than deterioration in Australian’s economy since the last monetary policy meeting with notable upticks in Australian and Chinese manufacturing activity that signal limited damage from a strong AUD. If the RBA makes no specific mention of wanting to see the Australian dollar lower, AUD will most likely recover its losses but if they express renewed concern about currency fluctuations, it could mark a top for the high flying currency.

Technically the uptrend in AUD/USD remains intact as long as the currency pair holds above 74 cents. However a drop below 76 opens the door for a smooth slide to 75 cents. If AUD/USD holds 76 cents, then a retest of the 9 month high of 0.7722 is likely.

Chart Of The Day

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