AUS Data and RBA Statement – AUD/USD Reaction

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AUS Data and RBA Statement - AUD/USD Reaction

As we get into the 11/4 session, we are seeing some key fundamental factors coming out of Australia. We saw retail sales and trade balance followed by the RBA monetary statement.

Retail Sales m/m (September): 1.2%
Forecast: 0.3%
Previous: 0.1%
retail sales sept aus

(click to enlarge; source: forexfactory.com)

Retail Sales surprised to the upside, partly due to the release of iPhone in September according to the Australian Bureau of Statistics. This matches January’s 1.2% growth as the strongest month-to-month growth. Continuing growth like this for a couple of more months should help revive the AUD

Trade Balance (September): -2.26B
Forecast: -1.78B
Previous: -1.01B (Revised from -0.79B)
aus trade balance sept.

(click to enlarge; source: forexfactory.com)

Australia saw the steepest trade deficit this year in September. This trend will keep driving the RBA’s narrative that the exchange rate is too high, which will in turn pressure the Aussie. A slight 1% growth in exports was covered by a 6% growth in imports.

The most important fundamental factor was the RBA monetary policy decision and statement. The central bank kept its official cash rate at 2.50% as expected. Glenn Stevens repeated the same language about the exchange rate being “above most estimates of its fundamental value, particularly given the further declines in key commodity prices in recent months.” (source: RBA)

AUD/USD Reaction

The AUD/USD has been falling, but it is because of greenback-strength. The AUD is still demanded as a high interest rate currency. This essentially means the RBA will be keeping the interest rate low to keep pressure on the Aussie.

AUD/USD 4H Chart 11/4
audusd 4h chart 11/4

(click to enlarge)

RBA Bounce; 0.88 is Key: The 4H AUD/USD chart shows price bounce up from its October and 2014 lows around 0.8650. This occurred after the RBA statement, which was neutral. The prevailing downtrend is still intact, and it would take a break above 0.88 to suggest otherwise at this point. In this scenario, price action would clear the cluster of moving averages in the 4H chart, and push toward 0.89. A break above 0.89 then would form a price bottom out of October’s action.

Bearish Continuation: If price can hold below 0.88, the pressure remains toward the 2014-lows with risk of breaking lower into fresh lows on the year into a major downtrend.

Target : If we use the width of the October consolidation – about 250 pips – for a target projection, it would point towards the 0.84 area.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.