Currencies have seen little direction for the most part as we begin the week, though the Australian dollar has been volatile following the inconclusive general election results over the weekend. AUDUSD initially dove, but subsequently managed to rebound to a 10-day peak at 0.7522, despite all three of the main credit ratings responding with warnings about the implications of the election to the government budget.
The AUD and the NZD have been remarkable robust recently and it led me to review the Analysis from June 15th when I was looking for a retrace before taking a SELL position. I wrote then that…”Technically, the Daily down trend remains is intact, a potential SELL area appears where the channel, 20 DMA and 23.6 FIB retrace levels coincide between 1.0580 – 1.0620. This would generate Target 1 – 1.0486, Target 2 1.0340 and Target 3 1.0173. A break above 1.0750 would be of interest for BUY positions.”
The retrace never occurred and the pair continued to consolidate sideways, the threat of a hung parliament following the Australian general election over the weekend cased the pair to fall to a low of 1.0378 before recovering to north of 1.0450 today.
The pair remains bearish trading close to the trend line on “Brexit Friday” and again last Thursday, also rejecting the 20 DMA on both occasions too. A clear breach and break of the 1.0450 level on the Daily time frame will generate a SELL position with Target 1 1.0340 and Target 2 at 1.0173.
Tomorrow (Tuesday) sees Retail Sales from Australia and the RBA decision on interest rates. This will clearly have an impact on the pair as further easing from the RBA cannot be discounted although this is unlikely tomorrow, due in part to the current political uncertainty. Further out (over the next few months) and parity between the two cannot be discounted, much will be dependent on inflation (CPI) in both Australia and New Zealand.
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