AUD/USD another failed attempt to break 0.7600; down 35-pips on the day
Currently, AUD/USD is trading at 0.7534, down -0.47% or 35-pips on the day, having posted a daily high at 0.7584 and low at 0.7527.
The Australian dollar vs. American dollar had a good run recovering 354-pips only in January after experiencing a 'liver shot' that dragged the pair lower to test critical lows at 0.7159 in December. Furthermore, a missed CPI figure makes traders and investors wonder about the real economic conditions of the 'no recession' country.
Historical data available for traders and investors, during January, indicates that AUD/USD pair had the best trading day at +1.18% (Jan.17) or 89-pips, and the worst at -0.81% (Jan.18) or 61-pips.
RBA's '2%' interest rate fatal mistake
Stephen Koukoulas, researcher at Per Capita (Think Tank) shares his views on The Guardian, noted, "It’s time to be blunt about economic management in Australia. It’s dreadful. The proof is that economic growth is floundering despite strong global conditions, unemployment has gone from among the lowest in the industrialised world to one of the highest, and inflation is below the bottom of the Reserve Bank target yet interest rates are still high compared with similar economies."
He continues, "The RBA was also blind to what was happening in the rest of the world. Most industrialised countries set interest rates at zero or less many years ago and they are now reaping the reward of this pro-growth approach. They are growing and unemployment is falling."
"The RBA refused to cut interest rates early or hard. It’s odd to think that less than a year ago, the RBA pig-headedly kept interest rates at 2% despite inflation falling below its target range. This crimped investment and spending and meant the Australian dollar was artificially strong. Even with two cuts last year, rates are high relative to the rest of the world and the RBA has still failed to hit the inflation target," concluded Koukoulas.
AUD/USD Technical Outlook
Valeria Bednarik, Chief Analyst at FXStreet, notes, "The AUD/USD pair plummeted to a fresh weekly low of 0.7514 at the beginning of the day, weighed by disappointing inflation, confirmed soft in the last quarter of 2016. According to the official release, inflation grew by 0.5% in the mentioned period, whilst yearly basis price growth was of 1.5%. That figures stand for the lowest annual inflation rate in 19 years."
She further writes, "The disappointment was limited as the numbers are in line with the RBA's forecast, not enough to turn on the alarms of an upcoming rate cut. Australian market's will remain closed on a local holiday this Thursday, leaving the macroeconomic calendar empty and the currency vulnerable to the performance of commodities and stocks. There are some technical signs of upward exhaustion, as in the 4 hours chart, the price settled above its 20 SMA for the first time since early January, whilst technical indicators in the mentioned time frame hold flat within negative territory, unable to regain positive ground. Dollar's weakness however, is keeping the downside limited, with a break below 0.7490 now required to confirm another leg lower."
In terms of technical levels, upside barriers are aligned at 0.7565 (horizontal resistance) and above that at 0.7597 (high Jan. 25). While supports are aligned at 0.7520-00 region and below that at 0.7458 (100-SMA, red color). On the other hand, Stochastic Oscillator (5,3,3) seems to head south towards oversold territory, therefore, there is evidence to expect further Aussie losses in the near term.
On the long term view, if 0.7834 (high April-2016) is in fact, a medium-term top, then the upside available is limited at 0.7809 (short-term 38.2% Fib). Furthermore, if the RBA is in 'no position' to increase rates in 2017, it faces a tough rival as the Fed expects to continue its pattern with -hikes. To the downside, supports are aligned at 0.7433 (short-term 23.6% Fib), 0.7182 (reverse long-term 61.8% Fib) and below that back at 0.6826 (low Jan-2016).
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