If Australian CPI can simply hit target tomorrow, we could see a higher AUD in the current trading environment. CPI is expected to rise tomorrow to 1.7% YoY according to a Reuters poll, up from 1.6% in Q2. However, the RBA’s preferred gauge is the ‘trimmed-mean CPI’ which is expected to remain steady at 1.6%. As this remains below RBA’s 2-3% target band the risk remains for RBA to cut if inflation doesn’t pick up. Yet with expectations for RBA to cut to 0.5% in November at just 22%, traders aren’t on guard for imminent easing. And data hasn’t been too bad since they last cut rates, with unemployment unexpectedly lowering. And another supportive feature for AUD is to see trade relations between U.S. and China improve. This places a bullish bias for AUD over the near-term, whilst key levels of support hold.
AUD/USD: Prices pulled back just as DXY rebounded from 97 support. The daily structure of AUD/USD remains bullish above 0.6832, although this is part of a counter-trend rally within a longer-term bearish trend. So whilst the next bullish target is the 0.6895 high, we’re also keeping an eye on how prices react around the upper channel line and / or the 200-day eMA, as they make likely targets for bulls (and therefore an area to book profits and cause a bearish reaction).
EUR/AUD: The bearish wedge remains in place after breaking beneath the lower trendline on the 21st October. After a minor retracement above 1.6204 support, another lower high has formed around 1.6310. Moreover, prices have broken beneath this support level today, so the bias remains bearish for EUR/AUD and for a run towards the base of the wedge around 1.59.
AUD/NZD: Prices have formed a new level of support around 1.0665. Due to the bullish momentum leading into the correction from the 1.0840, the bias is for a re-test of and break to new highs. Whilst the 1.0910 high makes for a viable target, we’re also seeing how prices react around the trendline over head – so keep this in mind when weighing up reward to risk potential of AUD/NZD. Either way, it looks like the corrective low is in so e remain bullish above 1.0665.
