Further weakness in the dollar or that’s it?

Let’s Re-cap yesterday, Nothing much happened until Around the release of the ISM manufacturing Index From the US, Market was expecting a forecast of 48.0 from a previous of 50.7.

Right Before the data was released EUR/USD printed a new Historical High of 1.5275, when the actual Data shows up 48.3, still Weaker than the previous month but better than the actual forecast, Euro went right back to where it started.

Is this market’s way of thinking, “ Hey The economy is not that bad, yeah it’s slowing but not as bad as we thought” ? Maybe… but USD/JPY back to its 3 years low @102.60, still shows sign that Traders in the market are not willing to think that way.

Risk Aversion is There and will probably stay this week,with what I call the Rate week, we have 5 Major Central banks with their rate decision, Starting with the RBA in about 2 hours time.

AUD/USD Outlook

RBA is expected to announce their rate decision in about 2 hours from writing this, Rumors have been circulating around that there might be a possibility that the RBA will Hold interest rate @ 7%. (market is expecting a 25bp Hike to 7.25%)

Earlier we had a Release of the retail sales data from Australia Which printed 0.5% lower than Expectations. Data Printed 0.0% compared to 0.5% the previous month. Coupled with the Current Account which came out at -19.4 B from A revised -16.4 B (Expectations was -18.0 B)

The Data Today Would Probably be taken into consideration By The RBA in their Interest Rate Statement, a Scenario Where The RBA would Wait and see, is now higher. Do keep In Mind that the RBA was willing to Hike 50bp Last Month but Decided to Go for 25bp and see what coming month will bring.

Technical wise, we have a confirmation of a bullish hidden divergence on the 4hour Chart Yesterday. Uptrend Channel is still Intact. Personally still Bullish on the AUD in the long run, but I still expect a healthy correctional pullback this week, especially with the daily stochastic unwinding the Overbought conditions.

No Divergences seen in the hourly Chart and There is room to move down further towards the 200MA @0.9300 area.(hopefully before the RBA Rate Statement).

With Market Uncertainties going around today, it is safer to trade the AUD only after the RBA Rate Statement. Majority of the Market is still expecting a 25bp Hike, but you cannot disregard rumors nowadays.

Resistance Levels

0.9494 –- February 28th High

0.9444 –- R1 Daily

0.9419 –- March 3rd High

0.9364 –- Pivot Daily
Support Levels

0.9310 — S1 Daily

0.9260 — Daily trendline Support

0.9230 — S2 Daily