Aussie surged to new 2009 high against dollar after RBA unexpected hikes interest rates from 3.00% to 3.25% today. While markets are generally expecting RBA to be the first major central bank to remove policy accommodation, today's rate hike is earlier than generally expected. In the accompanying statement, RBA noted that the risk of serious economic contraction in Australia now having passed and it's prudent to begin gradually lessening the stimulus provided by monetary policy. Further rate hikes is generally expected down the road considering that RBA is now comfortable with recovery in the global economy, in particular in its major trading partners like China.
Technically, Aussie breaks into new 2009 high against dollar and sterling today and the strength should carry on in near term. Some resistance might be seen initially as AUD/USD hits a fibonacci projection level while GBP/USD hits channel support. But after all, the larger trend is still in force for further rally in medium to longer term. In GBP/AUD, we're looking at prospect of further decline to 100% projection of 2.2877 to 1.9684 from 2.0979 at 1.7786.
Elsewhere, dollar remains pressured across the board. Aussie's strength is leading other major currencies to rise against the greenback. In addition, there are rumors that Gulf states are considering to switch to a basket of currencies, which includes yen and euro, for oil dealing. There is also talk that Iran might shift the currency reserves to Euro. Gold rises together with dollar's decline and is possibly set to take on 1025/1033 resistance zone in near term which would continue to pressure the greenback.
Looking at the dollar index, the break of 76.50 support suggests that recovery from 75.83 has completed and flip intraday bias back to the downside for 75.83 low and possibly below. Further decline will remain in favor as long as 76.99 minor resistance holds.
On the data front, Swiss CPI is expected to rise 0.1% mom, drop -08% yoy in September. UK INdustrial production and Manufacturing Production are expected to rise 0.2% and 0.3% mom respectively in August. Canadian building permits is expected to rise 4.5% mom in August. Ivey PMI is expected to rise to 56.6 in September.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.8684; (P) 0.8740; (R1) 0.8835; More
AUD/USD's strong rise and break of 0.8857 resistance indicates that recent rally is still in progress for 61.8% projection of 0.6284 to 0.8262 from 0.7702 at 0.8924 and possibly further to 0.9 psychological level. Considering bearish divergence condition in 4 hours MACD and RSI, we'd still anticipate strong resistance between 0.8924/0.9 and bring a short term top. Below 0.8758 minor support will flip intraday bias back to the downside again for 0.8567 support first. However, sustained trading above 0.9 will indicate that AUD/USD is rebuilding momentum and will target 100% projection at 0.9756 next.
In the bigger picture, as noted before, the strength of the rise from 0.6008 argues that AUD/USD is developing into another up trend. In other words, long term correction from 0.9849 has likely completed at 0.6008 already, after being support slightly above 76.4% retracement of 0.4773 (01 low) to 0.9849 (08 high). The current rally from 0.6008 might extend further to retest 0.9849 high next.
Sustained trading below medium term rising trend line (now at 0.8618) will indicate that a medium term top is formed. Some deep pull back and lengthy consolidation might then be seen, with prospect of fall to 0.7267/7702 support zone. But a break of 0.7267 resistance turned support is needed to indicate that whole rise from 0.6008 has completed. Otherwise, we'll continue to favor the longer term bullish case even in case of deep correction.
Economic Indicators Update
|--||GBP||NIESR GDP Estimate Sep||--||0.20%|
|0:30||AUD||Trade Balance (AUD) Aug||-1524M||-900M||-1556M||-1783M|
|3:30||AUD||RBA Rate Decision||3.25%||3.00%||3.00%|
|7:15||CHF||CPI M/M Sep||0.10%||0.10%|
|7:15||CHF||CPI Y/Y Sep||-0.80%||-0.80%|
|8:30||GBP||Industrial Production M/M Aug||0.20%||0.50%|
|8:30||GBP||Industrial Production Y/Y Aug||-8.70%||-9.30%|
|8:30||GBP||Manufacturing Production M/M Aug||0.30%||0.90%|
|8:30||GBP||Manufacturing Production Y/Y Aug||-9.30%||-10.10%|
|12:30||CAD||Building Permits M/M Aug||4.50%||-11.40%|
|14:00||CAD||Ivey PMI Sep||56.6||55.7|