audusd another potential downleg below 0 75007522 1850382017

Since our last analysis dated on 13 April 2017, the AUD/USD had declined as expected below the 0.7590/7610 key short-term pivotal resistance and hit the downside target/support of 0.7475 (printed a low of a low of 0.7455 in yesterday, 26 Apr U.S. session) before a minor rebound occurred to print a current intraday high of 0.7492 in today, 27 Apr Asian session. . Click here for a recap on our previous report.

Interestingly, the recent fall in the AUD/USD came in conflict in terms of direction especially against the major European currencies such as the EUR and GBP which has strengthened against the USD due to on-going election fever in Europe (French presidential election and U.K parliamentary election).

Since mid-April 2017, commodities related currencies such as the AUD, CAD and NZD have started to weaken on back drop of weakening commodities prices. There several factors that are likely to support a further potential decline in these commodities related currencies against the USD in the medium-term (1 to 3 weeks) and its underperformance against the EUR and GBP can continue to persist as well;

• Commodities such WTI Crude Oil continues to face downside pressure due to oversupply concerns from rampant U.S. shale gas production and conflicting messages from key OPEC member, Saudi Arabia on the extension of its on-going production cut among OPEC and non-OPEC members that will be due on June 2017.
• The recent rally seen in industrial metals such as copper and iron ore since the start of 2017 has started to fade due to China’s on-going policy to control overleveraging in infrastructure projects and dampen speculative activities in the current red-hot property market.
• Trumpflation trade theme may take some time to reignite as due to implementation risks of Trump’s proposed fiscal policies. Yesterday’s announcement of Trump’s administration proposed massive tax reduction plan offers little details on the funding these tax cuts  which is estimated to cost U.S$7 trillion. Therefore, a lack of details and clarity on funding is likely not to be welcomed by Congress’s deficit hawks members which will delay the implementation of tax reduction programme. After failure to pass the revised health care plan to replace Obamacare and if another disaster falls on the tax cut programme, markets will start to perceive that Trump’s next bold policy; infrastructure spending programme will face a tough challenge to realise.
• Technical elements have started to turn bearish on the benchmark CRB Commodity Index as it staged a bearish breakdown from a multi-month range configuration in place since June 2016. Downside momentum remains intact for a further potential decline to retest the August 2016 swing low of 176.66 and below opens up scope for a potential deeper decline to target the next support at 167.95/164.33 (see chart below)

Now, let’s us take a look at the latest technical elements on AUD/USD

Short-term technical outlook on AUD/USD

(Click to enlarge charts)

Key technical elements

• The pair has stage a bearish breakdown from its recent minor ascending range support from 10 April 2017 low now turns pull-back resistance at 0.7500.
• The key short-term resistance stands at 0.7522 which is defined by a former minor support congestion area from 21 April to 25 April 2017 and close to the 50% Fibonacci retracement of the recent decline from 24 April 2017 high to yesterday’s low of 0.7455.
• Since its 21 March 2017 high that hit the 0.7750/80 long-term range resistance, the pair has started to evolve into a descending channel with its lower boundary now at the 0.7400/7390 zone which also confluences with a Fibonacci cluster.

Key levels (1 to 3 days)

Intermediate resistance: 0.7500

Pivot (key resistance): 0.7522

Supports: 0.7440/30 & 0.7400/7390

Next resistance: 0.7585/7610

Conclusion

The AUD/USD may see a minor corrective rebound to test the 0.7500 intermediate resistance with a maximum limit set at the 0.7522 short-term pivotal resistance before another potential downleg materialises to target 0.7440/30 and below opens up scope for a further decline towards 0.7400/7390 next.

On the other hand, a clearance above 0.7522 is likely to invalidate the preferred bearish tone to trigger a more pronounced corrective up move towards the 0.7585/7610 medium-term resistance.

Charts are from eSignal

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