Australian dollar traded lower this morning after the publication of the Monetary Policy Statement RBA. In the RBA has lowered growth forecasts for 2014, citing mining investments due to reduced growth decline. High AUD is also another factor that has been cited with RBA saying that the lower exchange rate probably needed to ensure stable growth.
AUD / USD pushed to a low of 0.9428 after the news, but prices recovered quickly after the release of Chinese trade balance numbers. October Trade Balance came in at $ 31.10B USD, more than twice in September led by stronger than expected exports - 5.6% against 1.7% expected and a reversal from -0.3% in September. With Australia's economy closely linked to China's economic health, a stronger trade balance is always welcomed, lifting AUD / USD dip.
Time Table
However, it should be noted that the import growth rate remained relatively stable at 7.6 %, slightly better than 7.4% expectation. Therefore, the strong recovery that followed gave the overall downward air (due to the RBA orientation and the number of small jobs) seems a bit optimistic especially since it's right on the heels of more bearish ads just an hour before.
This observation can be explained if we consider the technical factors - prices hit bottom support channel that happens to be the confluence with the support level at the close of last Friday, while the readings stochastic were bouncing higher after briefly dipping into the oversold zone. Therefore, it is reasonable to believe that Chinese data submitted bullish reaction was exaggerated because of the bullish technical influences. This is confirmed when the rally was covered by the resistance of the channel top, opening a potential move to the bottom of the canal again.
Another possible reason would be the announcement of the nonfarm payroll United States later today. NFP print market expects a weaker than expected which would result in the Fed refraining from tapering QE in the coming months (or so they believe). As such, USD has always been to have a predisposition for reflex weakened, resulting in the strong upward movement in AUD / USD on the Chinese news.
That being said, with the market already prices in a weak USD scenario advance of the actual advert NFP, the risk of the opposite occurrence becomes greater - due to the typical buy rumor sell the new behavior . Therefore, the probability of prices heading Bottom Channel finally (maybe next week, if not post NFP) increases. Even in the AUD / USD most optimistic scenario where NFP came in negative, AUD / USD may still remain bearish as long as price stay below 0.952 at 954 ceiling
Links :.
EUR / USD Technical - Evaluation of the ECB Aftermath
GBP / USD - Resistance remains around 1.61
AUD / USD - Drift continues below 0.95
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