The AUD/USD is right back where we left it yesterday despite a pop during the Asia trading session after CPI came in a basis point above analyst expectations, allaying investor fears over Monday's weak PPI number. However, the mixed pricing data makes the central bank's upcoming monetary policy decision a bit cloudy. That being said, events in China could play more of a factor in guiding policy than recent economic data. Chinese equities headed south today with investors taking the central bank's tighter liquidity stance badly. Tighter liquidity in China could mean less demand for Australia's commodities, a negative development for Australia's economy and the Aussie. Meanwhile, investors are on their toes with U.S. New Home Sales and the Fed's monetary policy decision on the way. Not only do we recognize trend line inflection points in the AUD/USD but across the FX board as well. Hence, volatility could increase in the next 24-48 hours as investors digest upcoming U.S. data and news. Therefore, investors should keep a sharp eye on the S&P futures and monitor gold's ability to hold above their previous January lows.
Technically speaking, the AUD/USD is currently testing our key 1st and 2nd tier uptrend lines. These trend lines could serve as the last line of defense for the currency pair over the near term since they run through December '09 lows, or the .8730 level. As for the topside, the AUD/USD faces multiple downtrend lines along with 12/16 and 1/25 highs. Furthermore, the psychological .90 level may serve as a technical barrier now.
Resistances: .8985, .8995, .9006, .9022, .9044, .9060
Supports: .8962, .8947, .8929, .8919, .8904, .8881
Psychological: .90, December lows and January highs