The Aussie rallied yesterday and during today’s Asian session against the USD as the greenback weakened on soft data, while the Aussie found additional support from RBA’s interest rate decision. The bank as expected remained on hold at +0.75% and kept a more neutral stance in the accompanying statement. Characteristically, the bank reiterated that the Australian economy appears to have reached a gentle turning point and also stated that the risks surrounding the global economy are reasonable yet tilted to the downside. Also, the bank stated that rates are to remain low for an extended period and that it is prepared to ease monetary policy further if needed. We view the bank’s decision more on a “wait and see” position, as it still weighs the outcome of the past rate cuts, yet on the other hand the market seems to continue to price in a rate cut in the next meeting. The Aussie could be supported currently, as it is freed from the uncertainty of the interest rate decision and the upcoming financial releases seem to favour it. AUD/USD rallied yesterday and during today’s Asian session, breaking all resistance levels in our chart (now turned to support) and aimed for the 0.6850 (R1) resistance line. We switch our sideways bias, in favour of a bullish outlook for the pair. It should be noted though that the RSI indicator in the 4-hour chart has broken above the reading of 70, reaffirming the bull’s dominance, yet at the same time could be implying that the pair’s long position seems to be getting a bit overcrowded. Should the bulls maintain control over the pair’s direction, we could see the pair breaking the 0.6850 (R1) resistance line and aim for the 0.6875 (R2) resistance level. Should the bears take over, we could see the pair breaking the 0.6822 (S1) support line and aim for lower grounds
…while USD weakens on surprising soft manufacturing data…
The USD weakened substantially against a number of its counterparts yesterday as the ISM manufacturing PMI for November surprisingly dropped. The release reversed the recent euphoria and served as a reminder of the consequences of the US-Sino trade war. USD traders will worry for more than China regarding trade, as the US President announced tariffs on metal imports from Brazil and Argentina. In a tweet the US President, stated that the tariffs are to be “effective immediately” and also adding that “Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers”. Officials from both countries, replied that they will get in touch with the US President in order to sort the situation out. The uncertainty hitting the markets though could be maintained, especially as reports today show that the US is considering also 100% tariffs on French items, after France approved its new digital tax. USD/CHF weakened substantially during the American session, falling from the highs of the parity level (R2), breaking the 0.9945 (R1) support line (now turned to resistance) and stabilizing below it. We tend to retain our doubts for the pair’s direction south, despite the heavy drop based on two factors technically. First the pair seems to have stabilized during the Asian session, and second the RSI indicator in the 4-hour chart seems to bounce on the reading of 30. For us to adopt a bearish outlook for the pair we would at least require a clear breaking of the upward trendline incepted since the 18th of October. Should the pair come under the selling interest of the market, we could see it breaking the 0.9890 (S1) support line and aim for the 0.9835 (S2) support level. Should the pair’s long positions be favored by the market, we could see it breaking the 0.9945 (R1) resistance line and aim for the parity level (R2: 1.000), the pair was testing initially yesterday.
Other economic highlights today and early tomorrow
Today, during the European session we get Turkey’s CPI rates for November, UK final construction PMI for November and Eurozone’s PPI rate for October. Just before the Asian session starts, we get from the US the API weekly crude oil inventories figure and later on Australia’s GDP growth rate for Q3 and China’s Caixin services PMI for November. Also note that ECB’s Coeure speaks today.
USD/CHF 4 Hour
Support: 0.9890 (S1), 0.9835 (S2), 0.9775 (S3)
Resistance: 0.9945 (R1), 1.0000 (R2), 1.0060 (R3)
AUD/USD 4 Hour
Support: 0.6822 (S1), 0.6800 (S2), 0.6775 (S3)
Resistance: 0.6850 (R1), 0.6875 (R2), 0.6905 (R3)
