Weaker than expected Australian CPI put Aussie pairs on shaky ground today.
Will we see more losses for AUD/NZD?
Before moving on, ICYMI, yesterday’s watchlist looked at AUD/JPY’s uptrend pullback on China’s stimulus rumors. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. CB consumer confidence index improved from upgraded 110.1 in June to 117.0 in July to reflect stronger optimism vs. 112.1 forecast
Richmond manufacturing index slid from -7 to -9 as expected in July, indicating sharper pace of industry contraction
Australian headline CPI slowed from 1.4% q/q to 0.8% vs. 1.0% expected, annual reading down from 5.6% to 5.4% as expected
Japanese official noted that BOJ Governor Ueda believes long-term yields remain stable under yield curve control policy
Price Action News
After a bullish run in the earlier trading sessions, the Aussie sold off sharply across the board when the Land Down Under’s CPI readings were released during Asian market hours.
Both the headline reading and trimmed mean CPI came in weaker than expected, dashing hopes of more interest rate hikes from the RBA. The Kiwi also tumbled against its counterparts upon seeing the news.
So far, AUD is pulling back up against the U.S. dollar now that traders are turning their attention to the upcoming FOMC decision.
U.S. new home sales at 2:00 pm GMT
EIA crude oil inventories at 2:30 pm GMT
FOMC monetary policy statement at 6:00 pm GMT
FOMC press conference at 6:30 pm GMT
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Check out this short-term double top on AUD/NZD!
The pair is down to its neckline near S1 (1.0860) and a break below support could set off a drop that’s the same size as the formation or roughly 60 pips.
This should be enough to take the pair down to the next floor at S2 (1.0810) or the 1.0800 major psychological mark.
If support holds, on the other hand, AUD/NZD could recover to the latest highs around 1.0920 or higher.
Bearish momentum from the downbeat Australian CPI release might be enough to sustain a selloff, even until the FOMC decision.
Then again, the Kiwi might also be in for losses if risk aversion picks up strongly during the announcement.
In any case, just make sure you account for the average AUD/NZD volatility of 65 pips per day when trading this one!