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8 May 2013
Forex: AUD/USD chart setting up for further declines?
FXstreet.com (Barcelona) - The AUD/USD finished the session down 65 pips at 1.0186. Initially the pair had traded as high as 1.0252 early in the Asia session, but plummeted after the latest RBA Rate Decision which was released at 4:30GMT. The RBA decided to cut rates by 0.25%, taking its cash rate from 3.00% to 2.75% which is the lowest rate since 1959.
According to analysts at NAB Global Markets, “In examining the RBA’s motives for today’s decision, at least as far as they have been revealed in the post-meeting statement, the acknowledgement that growth was running below trend in the second half of last year and appears to have remained below trend thus far in 2013, is paramount."
They went on to add, “The strength of the exchange rate has also clearly played a part, the statement citing the persistence of a high exchange rate and the fact this is seen to be ‘unusual’ in the context of past falls in Australian export prices and past rate reductions. That plus weak credit demand were both seen to have supported today’s decision, with inflation (and which the RBA acknowledged has run a little lower than expected) together with the inflation outlook (‘consistent with target’) providing the scope to cut.”
From a technical perspective, the weekly and monthly charts are both shaping up to be very interesting. The first development to point out is the rectangular consolidation which has kept the pair in a range between 1.0150 and 1.0600 since early July 2012. Should the pair close below the 1.0150 level on a weekly basis, it would be a breach of the consolidation pattern which would have a measured move target of 0.9700.
Furthermore, if we zoom out and view the monthly chart it’s important to note there is actually a much larger pattern setting up. The pair has been forming a massive ‘pennant’ consolidation pattern which began forming in July 2011. Should the Aussie continue lower, the lower support boundary would come in near the 1.0100 level which if broken on a monthly (or weekly close) would have even further bearish implications. In fact, due to the time span and width of this pattern it would most likely be a very important development to the Aussie as the ‘pennant’ pattern has longer term measured moves all the way down near 0.8500.
According to analysts at NAB Global Markets, “In examining the RBA’s motives for today’s decision, at least as far as they have been revealed in the post-meeting statement, the acknowledgement that growth was running below trend in the second half of last year and appears to have remained below trend thus far in 2013, is paramount."
They went on to add, “The strength of the exchange rate has also clearly played a part, the statement citing the persistence of a high exchange rate and the fact this is seen to be ‘unusual’ in the context of past falls in Australian export prices and past rate reductions. That plus weak credit demand were both seen to have supported today’s decision, with inflation (and which the RBA acknowledged has run a little lower than expected) together with the inflation outlook (‘consistent with target’) providing the scope to cut.”
From a technical perspective, the weekly and monthly charts are both shaping up to be very interesting. The first development to point out is the rectangular consolidation which has kept the pair in a range between 1.0150 and 1.0600 since early July 2012. Should the pair close below the 1.0150 level on a weekly basis, it would be a breach of the consolidation pattern which would have a measured move target of 0.9700.
Furthermore, if we zoom out and view the monthly chart it’s important to note there is actually a much larger pattern setting up. The pair has been forming a massive ‘pennant’ consolidation pattern which began forming in July 2011. Should the Aussie continue lower, the lower support boundary would come in near the 1.0100 level which if broken on a monthly (or weekly close) would have even further bearish implications. In fact, due to the time span and width of this pattern it would most likely be a very important development to the Aussie as the ‘pennant’ pattern has longer term measured moves all the way down near 0.8500.