I have been of the opinion that the RBA will not cut in February but I notice in today’s press that the SMH warns that a cut is coming. If they do not cut rates, then we could see a nasty short squeeze, in which case the Aud would head back above 0.7800 and on towards the first Fibo resistance, currently at 0.7837 (23.6% of 0.8230/0.7720) and to the 100 HMA, currently at 0.7875. Beyond this, the 38.2% Fibo level at 0.7913 and then the 200 HMA at 0.7960 would attract, although I think any move towards/above 0.7900 would be a good sell area ahead of a resumption of the longer term down trend.
If the RBA do cut, then the 0.7720, current trend low will come under pressure ahead of the July 2009 low at 0.7700. This should provide strong support, although it is not far away and if taken out, the next stop for the Aud would most likely be at the Fibo extension level at 0.7655 (100% of 0.8230/0.7857 from 0.8003). Beyond here we are looking at the RBA’s stated target at 0.7500, beneath which there is little real support for the Aud until the next major Fibo supports to be seen on the monthly chart (below) at 0.7204 and then at 0.7183 (76.4% of 0.6006/1.1082 and 61.8% of 0.4773/1.1082). If/when seen, this area should be extremely strong support.
Economic data highlights will include:
M: AIG Performance of Mfg Index, TD Inflation
T: Building Permits, Trade Balance RBA Decision/Statement
W: AIG Performance of Services Index
T: Retail Sales, NAB Business Confidence
F: RBA MP Statement.
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