AUDUSD: Aud under pressure ahead of next week’s RBA meeting by FX Charts

The Aud got a real pasting on Friday, and after taking out 0.8000 it remained heavy for much of the session, despite a brief, minor squeeze back to 0.8050, trading downs to around the lows of 0.7950 by the time NY walked in. US traders sold it straight away, on the back of the weak Euro and the sharp sell-off in Copper (-3%), taking the Aud down to a spike low of 0.7880, before a bounce allowed it to close, sitting precariously above 0.7900.Today is the Australia Day Holiday and liquidity will be thin and driven by offshore interests. The major focus this week will be on the outcome of the FOMC Meeting  and Australian CPI release, the latter of which will be key to the thoughts of the RBA at next Tuesday’s meeting. Most analysts appear to think the RBA will remain on hold , but some analysts think the RBA will cut by 25bp. Westpac in particular  seem pretty adamant that they will cut, and they may have a point following the surprise cut last week by the BoC, although personally, I suspect that the current sharp decline in the Aud, which in itself is akin to a rate cut, may see the RBA err on the side of caution in order to keep their firepower up their sleeve.

Whatever happens, I think the Aud is heading lower, either sooner or later, and below Friday’s low would target 0.7765 (200 Month MA), the July 2009 low at 0.7700 and beyond,  possibly to the RBA’s stated target at 0.7500, albeit not for a while. As I have said over the last 6 months, the technical target looks to me to be 0.6000 (monthly chart below)- a long way off still, but we are heading in the right direction!!

The topside will now see sellers at 0.7950 and then at 0.8000 and at 0.8015. The 100 HMA is far off at 0.8100 at present, although I don’t think we are going anywhere close, but if we do see a decent rally, I would still be looking to sell into it, with a SL placed above the 200 HMA, currently  at  0.8150 but heading lower.

Economic data highlights will include:

M: Australia Day

T: WBC Leading Index, NAB Business Confidence/Conditions, China Leading Economic Index

W: CPI

T: Import/Export Price Index

F: Private Sector Credit, PPI.

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