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AUD/USD 0.9200 Support at Risk as Australia Business Spending Falters

AUD/USD 0.9200 Support at Risk as Australia Business Spending Falters

David Song, Strategist

Talking Points:

- USDOLLAR Threatens Former Support Ahead of Downward Revision to 1Q GDP

- AUD/USD Needs Break & Close Below 0.9200 to Favor Downside Targets

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10495.39

10507.59

10483.8

0.06

75.21%

USDOLLAR Daily

AUD/USD 0.9200 Support at Risk as Australia Business Spending Falters

Chart - Created Using FXCM Marketscope 2.0

  • Need Break Above Former Support to Favor Larger Rally
  • Interim Resistance: 10,602 (38.2 retracement) to 10,615 (78.6 expansion)
  • Interim Support: 10,354 to 10,375 (50.0 retracement)

Release

GMT

Expected

Actual

New Home Sales (APR)

14:00

425K

433K

New Home Sales (MoM) (APR)

14:00

10.7%

6.4%

Click Here for the DailyFX Calendar

The rebound in New Home Sales did little to spur a further advance in the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar), and the greenback may face a near-term pullback going into the final week of May as it fails to push back above former support (10,500-509).

The greenback may consolidate ahead of the preliminary 1Q GDP print as the report is expected to show the growth rate contracting 0.5 percent during the first three-months of 2014, and a marked downward revision may dampen the appeal of the reserve currency as it drags on interest rate expectations.

Despite the bullish break in price and the Relative Strength Index (RSI), it looks as though the Fed will retain its current approach at the June 18 meeting, and the USDOLLAR remains at risk of carving lower highs & lower lows during the summer months as Chair Janet Yellen continues to endorse a dovish outlook for monetary policy.

Read More:

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AUD/USD 0.9200 Support at Risk as Australia Business Spending Falters

AUD/USD Daily

AUD/USD Daily Chart
  • Bearish RSI Momentum Highlights Risk for Larger Decline
  • Interim Resistance: 0.9330 (61.8 retracement) to 0.9340 (61.8 expansion)
  • Interim Support: 0.9200 (100.0 expansion) to 0.9220 (61.8 retracement)

Join DailyFX on Demandto Cover Current Australian dollar Trade Setups

The greenback rallied against three of the four components, led by a 0.17 percent decline in the Euro, while the Australian dollar bucked the trend as the AUD/USD continues to hold above the key 0.9200-20 support zone.

With that said, the AUD/USD may continue to consolidate ahead of the next Reserve Bank of Australia (RBA) interest rate decision on June 3, but the economic developments coming out of the $1T economy may drag on the higher-yielding currency as 1Q Private Capital Expenditures, a proxy for business spending, is expected to contract another 1.9 percent following the biggest decline since 2009.

In turn, the RBA may come under increased pressure to further embark on the easing cycle, and the AUD/USD may struggle to hold its ground in June should Governor Glenn Stevens open the door for another rate cut.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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