Asia Session: AUDUSD continues to slide

Most traditional risk assets performed fairly poorly throughout the session, especially the aussie and equity markets throughout Asia. Whilst there were no major market moving announcements or headline data releases, it appears investors in Asia are still wary of global economic conditions and, accordingly, are more willing to be risk-negative rather than risk-positive, unlike investors in Europe who appear to have developed a resistance to some risk-negative headlines that would have sent them into a panic just months ago.

The sell-off may not be over for AUD/USD
As was mentioned earlier, the aussie continued to slide against the dollar, eventually hitting a low around 1.0460. A combination of technical and fundamental factors created the perfect mixture for AUD/USD downside. Technically, the pair broke through a key support level around 1.0500 overnight and, in doing so, broke through the bottom of its recent trading range. On the macro side, better than expected retail sales data out of the US is driving investors to USD as they price in a decreased chance of further QE from the Fed. Finally, Australian’s domestic data took an unexpected turn when it showed that consumer confidence fell 2.5% month-on-month, cementing the headline figure well in pessimistic territory (96.6 vs. 99.1 prior) and, conversely, causing the aussie to spike lower.

Why are Australians becoming so pessimistic?
This confidence data highlights how cynical Australians are becoming. But is this really that surprising given events offshore and recent comments from the RBA? In Europe, the US and throughout Asia investors are calling on central banks to attempt to boost global growth throughout numerous stimulus/policy easing measures due to lacklustre levels of economic growth. Domestically, the RBA tempered calls from households for more rates cuts when it warned it would not risk re-inflating a housing bubble. Hence, it appears sentiment in Australia, like most of the world, hangs on the possibility of more action from the world’s major central banks, all of which seem to be waiting on the ECB after Draghi’s latest pledge.

Data watch
In other news, Australia’s Wage Cost Index surprised the market on the upside, printing at +1.0% q/q (expected and prior +0.9%). However, the aussie, unsurprisingly, was unmoved by the data.
In upcoming sessions volume may be a little light with both France and Italy out for a Bank holiday. Furthermore, the only headline releases from the region are from the UK, with jobless claims data and claimant and unemployment rates set to be released. The former is expected to print at 60.K and the latter two are anticipated to have remained unchanged at 4.9% and 8.1%, respectively.

Ones to watch: NZD/USD
This pair has broken through a key support level around 0.8065 and, consequently pushed to a session low around 0.8030. Nonetheless, it is important to see whether the pair retests the aforementioned support level as a resistance level. If so, it may pave the way for push lower. Standing in the way is a fairly large support line around 0.8000.
NZD/USD – hourly
Source: eSignal

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