The Aussie dollar took a dive over the last couple of days on the AUDUSD charts after some disappointing data. This has left the ranging pattern in tatters and could signal the start of a new bearish movement.
The Australian economy has been looking a bit shaky for some time and it appears the market has finally given up looking on the bright side. The data this week has seen Business confidence fall from 11 to 8, along with home loans missing estimates of 1.1% to record just 0.3%. Westpac’s consumer sentiment survey showed a big fall, dropping from 3.8% a month ago to -4.6% this month.
Last week we saw the Reserve Bank of Australia hold interest rates steady at 2.50% and Governor Stevens suggest the Aussie dollar had further to fall. We also saw GDP fall from 3.5% to 3.1% y/y, however, this was above estimates of 3.0% so the market wasn’t too disappointed. This growth is still relatively strong, but the trend is slightly worrying. The Australian economy will benefit from a falling Australian dollar, so it’s no surprise to see the RBA try to talk it down. It seems for now they are getting their way.
The bottom of the channel at 0.9200 had been tested a number of times and was holding firm up until today when the disappointing consumer sentiment results acted as the straw that broke the camel’s back. The rampant US Dollar over the past week has contributed to the breakdown in the channel.
Going forward watch for the Australian Unemployment rate on Thursday and Chinese CPI,which is due at the same time. These both have the ability to confirm the bearish breakout, or turn it into a false one.
The Stochastic Oscillator on the H4 chart is showing overbought conditions so it would be no surprise to see a pullback. We may see a pullback that tests the bearish channel before rejecting off it, in which case a bearish breakout will be confirmed and the AUDUSD pair will look like a very attractive short.
Either way, the Aussie dollar is going to be one to watch over the next couple of days with some big data coming out of Australia and China. The breakout could well prove to be the confirmation of a bearish trend.