Revealed in the August 13th post, the RBA’s purpose to lower OCR was to focus on lower AUD/USD in order to raise GDP levels particularly when AUD/USD Vs GDP correlated in severe negative territory. At the August RBA announcement, AUD/USD traded in the middle 0.7600’s, today AUD trades at the bottom 0.7600’s while the latest GDP reported + 0.5 for the June quarter and a healthy 3.3% annualized. Most respected Glenn Stevens is perfectly on track in his economic guidance to Australia.
What remains a problem however is AUD/USD correlates to AUD/CAD and AUD/CHF to +69% and +91% but negative 90% and minus 76% to AUD/JPY and AUD/NZD.
AUD/USD to travel higher for today must break 0.7675. AUD/USD achieves 0.7675 by a break of 0.7648 yet the top of the day’s channel is located at 0.7685 and many resistance points are built into upper prices above 0.7648 from 0.7661, 0.7667, 0.7672 and 0.7676. In the larger picture, 0.7802 remains the big break point to see AUD far higher to target 0.7900’s. Not only does the RBA want AUD lower but AUD prices are engineered to achieve lower prices.
The base in AUD/USD is built upon 0.7319 and AUD/USD’s price overall is well balanced. Well balanced means AUD will struggle to hold extreme spikes therefore more range trading is expected with focus on a slow drip to the downside.
Most vital break points below in AUD/USD are located at 0.7599, 0.7550, 0.7498 and 0.7448. Two points today are vital, 0.7603 and 0.7599. The level at 0.7599 is bottom of the range and 0.7603 is the day’s bottom price. What remains on the downside is 0.7585 and 0.7571 and important to 0.7550 because 0.7550 won’t break easily. Most vital upper targets today are 0.7622 and 0.7648.
AUD/CAD price is built upon a base at 0.9464 and most vital to test 0.9464 is support just above at 0.9631. AUD/CAD not only trades at today’s bottom at 0.9831 but the most important break point is 0.9823. Next below 0.9823 is levels 0.9789 and 0.9772.
What drives AUD/CAD lower is the falling lines at 0.9924 and 0.9889. Both must break in order for AUD/CAD to trade at higher prices. The best AUD/CAD achieves higher is 0.9937 on breaks of 0.9889 and 0.9924 and many resistance are built into current prices from 0.9901 to 0.9906, 0.9914.
Intraday AUD/CAD price is low yet well balanced overall. The vital break points today are located at 0.9857 and 0.9856. A break higher at 0.9857 sustains higher AUD/CAD over coming days. Overall, 0.9823 and 0.9857 decides AUD/CAD destiny over next day’s. Above 0.9857, AUD/CAD goes higher and lower on a break of 0.9823.
Brian Twomey, Inside the Currency Market, btwomey.com