AUD/USD Failing at Key Technical Levels

AUD/USD Failing at Key Technical Levels

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AUD/USD Failing at Key Technical Levels

Beware of renewed losses in AUD/USD. The Australian dollar off this weekend’s softer industrial production and retail sales reports but it may not be able to ignore tonight’s dovish RBA minutes. When the Reserve Bank last met this month, they surprised the market with a quarter point rate cut that sent AUD to its lowest level in 5 weeks. The central bank’s frustration with the low level of inflation and subdued labor cost growth should make an appearance in the minutes but investors will be combing the report for hints on additional easing. However considering that the rate cut was not discounted by the market a generally dovish tone could be enough to drive AUD back to the day’s lows.

Technically, there’s major resistance above current levels -- the 50% Fib of this year’s rally sits at 0.7350, where we also have the 100-day SMA. The 50-week SMA is at 0.7300 and the 20-week SMA at 0.7330. If resistance at 0.7330 holds, we expect AUD/USD to make a run for support at today’s low of 0.7240, right under the 200-day SMA.

EUR/USD – Failing Right at 50-day SMA

EUR/USD – Failing Right at 50-day SMA

Chart Of The Day

EUR/USD – Failing Right at 50-day SMA

Yes we are talking EUR/USD 3 days in a row but that’s the trade we are in and it’s the most important pair right now. This week the ECB cut interest rates, extended its QE program and the EUR/USD rallied. Yellen warned that delaying a rate hike is a risk and NFPs were strong but the USD barely rallied. While it may be difficult to remain confident in our views that EUR/USD will drop back below 1.08, the fundamentals remain intact. Also, ECB officials were not happy with the market’s reaction. ECB member Constacio was the first to say that the markets got the ECB’s message wrong. A rising euro diminishes the effectiveness of ECB stimulus.

Technically, the short squeeze in the EUR/USD stopped right at the 50-day SMA as shown in the attached chart. There’s also a significant resistance above current levels between 1.10 and 1.1060. The 100-day and 200-day SMA should cap gains for the pair. In terms of support the main level to watch the July swing low of 1.0809. Once that’s broken it should be clear sailing to 1.07.