The Aussie continued to move to the downside last week, validating the Reserve Bank of Australia’s (RBA) previous comments that investors were underestimating the risk of a decline in the Australian currency.
Economic data from Australia was low in volume, but the Australian Security Intelligence Organisation (ASIO) raising Australia’s terror level to “high” following a major police operation the week prior has clearly agitated investors.
The upcoming week is going to be a busy one for Australia, with a large variety of economic releases scheduled. This includes the latest consumer confidence, retail sales, commodity report, trade balance, building approvals and RBA annual report.
Although the RBA had previously stated that the currency remained “overvalued” for months and Governor Stevens was explicit in suggesting that “investors were underestimating the chances of a significant drop in the AUD” the recent downturn has been accelerated by security concerns, not necessarily disappointing economic performances. The RBA had also previously warned that Australia was set to enter a weaker period of economic growth and if this week’s data provides validity to those claims, the bear run for this pair might not be over yet.
The technicals on the Daily timeframe clearly shows how weakly the Aussie has performed since falling from its pennant/triangle pattern. The pair now firmly finds itself in a bearish channel and it would likely require a very weak US NFP on Friday to inspire rise appetite and test this technical pattern. In the meantime, Aussie support can be found around 0.8683, 0.8676 and the current yearly low, 0.8659. If the Aussie attempts to recover losses, resistance can be found at 0.8770.
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