AUD/USD: Weekly Technical Analysis For February 2-6, 2014

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Fundamental Analysis:

The Australian dollar weakened against the greenback during last weeks trading session and ended the week close to a five-and-a-half year low against its U.S. counterpart on Friday, amid growing expectations for a near-term interest rate cut in Australia. Data released earlier in the week showed that inflation in Australia rose at its slowest annual pace in two and half years in the fourth quarter as fuel prices plunged.

The Australian Bureau of Statistics said on Wednesday that consumer price inflation rose 0.2% in the last quarter, below expectations for a 0.3% gain. Year-on-year, Australian CPI increased by 1.7% in the three months to December, compared to expectations for a 1.8% rise.

The soft inflation reading fueled hopes that the Reserve Bank of Australia will cut rates at the conclusion of its upcoming policy meeting on February 3.


Meanwhile, the dollar had strengthened broadly on Thursday after the Federal Reserve indicated that interest rates could start to rise around mid-year.

Following its policy meeting on Wednesday, the Fed said it would keep rates on hold at least until June and reiterated its pledge to be patient on raising interest rates, while acknowledging the solid economic recovery and strong growth in the labor market.



Technical Analysis:

Weekly bias remains bearish as 21 and 55 EMA’s remains crossed downward on 4 hours, Daily, Weekly and Monthly time-frames. Also RSI, MACD and SSRC oscillator momentum indicator signals more sell off is expected in the pair. There is no sign of reversal yet and further decline should be seen in near term to 100% projection at 0.7416 next if price is able to breach 0.7718 support/demand zone. On the upside, break of 0.8024 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.


In the week ahead, investors will be turning their attention to Friday’s U.S. nonfarm payrolls report for further indications on the strength of the recovery in the labor market.

Tuesday’s policy meeting by the Reserve Bank of Australia will also be in focus.

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