Daily Report: Aussie Extends Decline on Weak Stocks, Consumer Confidence

The Aussie extends its slump against dollar today on expectation that Fed is going to hike rates next year. Additional pressure was seen in the Aussie as Westpac consumer confidence dropped steeply by -4.6% in September. While dollar remains generally firm, buying in the greenback has shifted away from the stabilizing European majors to commodity currencies. Among the commodity currencies of Aussie, Kiwi and Loonie, Aussie is so far hardest hit this week. Part of the reasons is the general weakness in Asian equities outside of Japan, following the pull back in US stocks overnight. Major Asian indices are in red at the time of writing, with HK HSI down -1.8%, Shanghai composite down -0.8% and Singapore Strait times down -0.2%. Nikkei also opened lower but reversed earlier loss in Japan afternoon.

In UK, BoE governor Carney said yesterday that economy recovery in UK has “exceeded all expectations” with “momentum”. And he affirmed that expectation that normalization of interest rates is near. And, rates could begin to rise “by the spring” and thereafter rise “very gradually”. And as a result, inflation would settle at around 2% by the end of BoE’s forecast horizon with additional 1.2m jobs added to the economy. Sterling turned sideway against dollar after selloff reached climax yesterday. But the pound would stay under pressure with all the uncertainties over the referendum on Scottish independence.

Elsewhere, Japan machine orders rose 3.5% mom in July versus expectation of 4.0% mom. The economic calendar is rather light today. Canadian capacity utilization rate will be release in US session while US will release wholesale inventories.

Daily Pivots: (S1) 0.9163; (P) 0.9226; (R1) 0.9264; More…

AUD/USD drops to as low as 0.9156 so far today and took out 38.2% retracement of 0.8659 to 0.9504 at 0.9181. The pair could have completed a head and shoulder top pattern too (ls: 0.9460, h: 0.9504, rs: 0.9401). Intraday bias remains on the downside and deeper fall should be seen to 61.8% retracement at 0.8982. On the upside, above 0.9217 minor resistance will turn bias neutral and bring recovery. But near term outlook will now stay mildly bearish as long as 0.9401 resistance holds.

In the bigger picture, price actions from 1.1079 are viewed as a medium term correction. At this point, we’re still slightly favoring the case that such correction is completed at 0.8659 already, ahead of 50% retracement of 0.6008 to 1.1079 at 0.8544. However, such view is dampened by the fact that AUD/USD failed to sustain above 55 weeks EMA and was rejected from there. Further downside acceleration could extend the correction from 1.1079 through 0.8659 to 0.8544 fibonacci level and below.

AUD/USD 4 Hours Chart

AUD/USD Daily Chart

Machine Orders M/M Jul

Westpac Consumer Confidence Sep


Capacity Utilization Rate Q2


Wholesale Inventories Jul


Crude Oil Inventories


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