The Australian economy has come back into focus ahead of today's Reserve Bank of Australia (RBA) monetary policy minutes. Markets for some time now have been focused on the US markets and the USD in particular, with the impending trade war with China and the US recovery being the core focus, and the Australian dollar has been hurting as a result. The monetary policy minutes due out today are likely to give some insight into what the RBA is thinking and has the potential to be a little hawkish about the prospect of lifting interest rates. Weighing on this will be last weeks disappointing jobs report, and the fears around a slowdown in China with the trade war - something that could have a big impact as China is Australia's largest trading partner. So the feeling at present from most of the market is that we may see a subdued and cautious RBA instead of the hawkish one some are hoping for. Something that will certainly be working in the RBA's favour is the fall in the AUDUSD which is helping to support the economy, especially in the export sector. One thing that is certainly clear though, is that with the US pushing rates up we will continue to see some weakness in the commodity currencies which have traditionally had stronger rates and been attractive to risky investors - so the decline may be for some time.
For the AUDUSD technical traders there has been nothing but bearish sentiment as of late and for good reason with a very strong bearish trend line on the daily chart helping to push things down. Last week there was hope we may see a rebound, but that was quickly defeated as the wedge pattern lead to a sharp breakout in the bears favour and saw the support level at 0.7467 broken rapidly. With the bears looking in control the next levels of support can be found at 0.7371 and 07341, with 0.7371 likely to be a major focus for the bears. Additionally, I would also be watching the 50 day moving average as can be seen on the charts as traders have been playing off it as well. In the event the bulls come back into the market I would expect strong resistance at 0.7467 and I would be surprised to see this break in these market conditions.
The New Zealand dollar is also in focus this week with GDP and trade balance data due out, and the market is not particularly hopeful at present. The NZDUSD last week failed to break above the 70 cent mark and has since been slipping lower as a result, and on the back of a strong USD. With resistance looking strong at 0.6966, and market sentiment remaining bearish, traders will be focused on support at 0.6819 and the potential for a strong test here. The 20 day moving average is also worth noting, though not a major I feel in this instance. All in all, unless we see some positive economic data it may be a struggle for the NZD to continue higher anytime soon.
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