Loonie in action!
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The pair has been in a downtrend basically for all of 2019, but the momentum seems to have slowed significantly in August. While still in a downtrend last month, it was a slow grind lower (forming a falling ‘highs’ pattern in the process) while finding major support around 0.66857-0.66783 (being strong area of interest/Support). But the market is currently bouncing higher on USD weakness after a disappointing update in U.S. manufacturing conditions (ISM Manufacturing PMI - AUG) and pushing the market higher to potentially retest the falling ‘highs’ pattern.
If you’re a bear on AUD/USD, this bounce and retest of the falling ‘highs’ could be your opportunity to play the trend lower at a better price, so be on a lookout for bearish reversal patterns before putting together your short position plan. And if Australian GDP disappoints, this could be the catalyst that could turn this back into a momentum trade as a weak GDP read will likely up the probability that the RBA could cut rates sooner than later.
If you’re an AUD/USD bull, you may want to wait for the scenario of an upside break of the falling ‘highs’ and a better-than-expected GDP read before taking a long position. Given the bearish rate cut expectations bias on the Aussie, it will likely have to take both factors for traders to get bullish on the market, even with USD weakness already in play.
If you’re a bear on AUD/USD, this bounce and retest of the falling ‘highs’ could be your opportunity to play the trend lower at a better price, so be on a lookout for bearish reversal patterns before putting together your short position plan. And if Australian GDP disappoints, this could be the catalyst that could turn this back into a momentum trade as a weak GDP read will likely up the probability that the RBA could cut rates sooner than later.
If you’re an AUD/USD bull, you may want to wait for the scenario of an upside break of the falling ‘highs’ and a better-than-expected GDP read before taking a long position. Given the bearish rate cut expectations bias on the Aussie, it will likely have to take both factors for traders to get bullish on the market, even with USD weakness already in play.
Nota
The Australian GDP growth is under RBA forecast (again) - where now for the RBA?To achieve the RBA's forecast of 2.5% growth for 2019 the second half of 2019 will need to register a growth of 1.6% (more than 3.0% annualized). That now seems out of reach and makes the assumption of a "leap" to 2.75% in 2020 even more heroic.
In that regard, the partials around retail and residential building activity that we have seen for the start of the September quarter are also disappointing.
These results therefore further strengthen the case for a rate cut in the very near term. Author: Eamonn Sheridan
Nota
These are challenging timescyclical weakness, centered on construction
powerful structural headwinds from weak wages growth and productivity, constraining consumer spending
the global economy is slowing and downside risks have intensified
Looking ahead
recent policy stimulus (tax cuts and interest rate cuts) will provide a boost to activity - but given the weak starting point and the powerful headwinds - the risk is that growth remains below trend over the remainder of 2019 and through 2020.
Nota
Breakout worked. Price gone wild up and momentum was stronger for bull after some top tier report like NFP outlook last week for greenback being poor!
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