AUD/USD: downside is open, but markets waiting for US GDP
- AUD/USD poised for further declines with little technical support in sight.
- DXY strong, but potential maxed out today ahead of US GDP Friday.
- ECB made the way for further upside in the greenback on a dovish taper.
- Central Bank divergences driving the market, Aussie CPI cemented the RBA on hold.
Currently, AUD/USD is trading at 0.7662, down -0.54% on the day, having posted a daily high at 0.7721 and low at 0.7661. AUD/USD is making tracks to the downside, extending the CPI supply based on today's ECB dovish taper announcements making for a strong bid on the greenback. The divergence between the Central Banks is now confirmed and this should continue to weigh on both the euro and Aussie in their positive correlation. Markets now await the US GDP report on Friday to possibly add further supply to the Aussie.
US GDP to tip the price off the edge of 0.76 handle?
Friday's GDP report should support the case for a December interest rate increase," explained analysts at ING Bank. "With growth looking firm, inflation likely to rise and Federal Reserve officials broadening out the reasons for why higher interest rates much be required (financial stability risks, asset valuations and loose financial conditions) we think next week's FOMC statement will underline the strong case for a December interest rate rise," the analysts at ING added.
Analysts at Westpac offered their short-term and longer-term outlooks:
AUD/USD 1 day:
Falling in response to a stronger US dollar. The next target is 0.7635 – the June high – if the USD rally continues.
AUD/USD 1-3 month:
If the RBA remains firmly on hold, as we expect, and the US dollar rises on the delivery of a Fed interest rate rise in December, then AUD/USD could fall to 0.76 by year-end.
AUD/USD levels
Support levels: 0.7650, 0.7610 and 0.7580
Resistance levels: 0.7700, 0.7730 and 0.7770
Technical Confluences Indicator shows that there is very little support for the Aussie at these levels, while Valeria Bednarik, chief analyst at FXStreet, explained that from a technical point of view and in the short term, the pair is still poised to extend its decline. "The 20 SMA has accelerated its decline above the current level, whilst the RSI indicator maintains its downward slope, currently at 25," Valeria added.