Australian Dollar bulls will not be able to count on the economic calendar for encouraging news next week. In spite the data docket, the technical outlook points to the possibility for gains against the US Dollar.
Australian Dollar Could Rise on Near-Term Technical Correction
Fundamental Outlook for Australian Dollar: Bearish
- Rate Cuts and Softer Oil Prices Fail to Boost Australian Business Confidence - Australian Dollar Might Be the Biggest Victim of the Current Financial Crisis
Australian Dollar bulls will not be able to count on the economic calendar for encouraging news next week. Producer Prices probably declined in the third quarter reflecting the sharp selloff in oil. Indeed, crude costs shed a whopping 40% in the three months through September. While it may take more time for price transmission mechanisms to replicate this dynamic in Consumer Prices, the Reserve Bank of Australia will be undeterred in their campaign to slash borrowing costs. RBA chief Glenn Stevens issued a hefty 100-basis-point rate cut earlier this month, saying that “the next CPI is likely to show an increase of around 5%...but the Bank remains of the view that inflation will start to decline in 2009.” Rounding out the week, Motor Vehicle Sales probably continued to decline in September having shed -3.5% in August. The economic downturn likely saw a majority of Australians tighten their belts ahead of the lean period ahead, while frozen credit markets probably kept necessary financing away from most of the few that did consider buying a new car.
In spite the data docket, the technical outlook points to the possibility that the Australian dollar may still see some gains against its US counterpart. The US Dollar Index, an average of the greenback's value against six major currencies, looks to have found resistance and may be ready for a near term reversal. The Aussie stands to benefit should this correction materialize, with bullish momentum meeting initial resistance at 0.7232, the 38.2% Fibonacci retracement of the 09/22-10/08 decline. - IS