The pressure on the Aussie dollar has continued into the US session falling below its previous support versus the greenback at 1.0595 which has supported it previously on 23rd of last month and helped it to go up to 1.0854 whereas it has started easing back again to put technical pressure too on The Aussie dollar which came under pressure in the Asian session after the RBA decided too keep the interest rate unchanged again at 4.25% hinting that there can be a chance for a cut to come in the case of further deterioration in the economic performance amid continued easing of the inflation pressures saying that the inflation outlook would provide scope for easier monetary policy expecting CPI inflation to fall further over the next quarter or two and on the underlying terms, it expected the inflation to be around 2½ per cent over the coming one to two years and by abstracting from it the effects of the carbon price, it expected inflation to be from 2% to 3% y/y.
This maintained dovish inflation outlook could weighed on the Aussie dollar which has been actually undermined by the falling back of Feb AIG services performance index to 46.6 into the contracting territory after rising in Jan to 51.6 from 49 in December and 47.7 in November and also by the massive drop of the companies operating profits in the fourth quarter quarterly by 6.5% while the markets were waiting for no change after rising in the third quarter rising by 4.7%.
From another side, the Aussie has found the another pressure coming from the Chinese growth downgrading by china's prime minister Wen in his annual testimony in front of the Chinese Congress to be just 7.5% in 2012 from the previous estimation in 2005 to be 8% putting inflation target at 4% this year which means that the Chinese officials are expecting the growth to dampen the prices while the Chinese inflation rate in January was 4.5%y/y showing rooms for deeper declining to come and So, these expectations have raised the markets speculations of lower demand for the Australian commodities to be this year from China weighing down on the Aussie dollar.
From another side the greenback is still keeping its ascending pace since the Bernanke's semi annual testimony in front of the financial committee of the house last week which has dampen the expectation of having a QE3 soon again pushing up the demand for the US dollar which has been already underpinned by market risk aversion sentiment with the current worries about the possibility of failing of the current Greek offering to its debt private creditors for exchanging it with longer term debt voluntary which can trigger collective action clauses in Greece's bond swap to force them to do which can cause financial turmoil in the CDs market. So, the profit taken option was the favorite option to the investors at these current levels in the equities market before the end of this offering later next Thursday which is carrying new ECB and BOE meetings are need to be watched too by God's will.
God Willing, the Aussie dollar can face now versus the greenback, in the case of falling supporting levels at 1.0524, 1.0426, 1.0351, 1.0230, 1.0191, 1.0143. 1.0042 before parity while rising up again can face now resisting level at 1.0815 before 1.0854 again which breaking it can open the way for 1.1 psychological level before meeting another resistance at 1.1078 whereas it has starting falling on 27th of last July to reach 0.9385 on 4th of last October whereas it has formed its bottom to the these current levels.
FX Market Strategist
Walid Salah El Din