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AUD Outperforms Comm. Bloc. Peers Ahead of Australia CPI, RBA Meeting

AUD Outperforms Comm. Bloc. Peers Ahead of Australia CPI, RBA Meeting

Talking Points:

- Australia 3Q Inflation Report to Drive AUD/USD Volatility Ahead of RBA Meeting.

- NZD/USD Carves Bearish Pattern Ahead of RBNZ’s Last 2016 Rate Decision.

CurrencyLastHighLowDaily Change (pip)Daily Range (pip)


AUD/USD Daily Chart

Chart - Created Using Trading View

  • AUD/USD may continue to face a narrowing range ahead of the Reserve Bank of Australia’s November 1 interest-rate decision as the pair remains stuck in the ascending triangle formation carried over from earlier this year; may only be a matter of time before the pair makes a more meaningful attempt to break the near-term resistance zone around 0.7730 (61.8% retracement) to 0.7740 (78.6% expansion) as Governor Philip Lowe and Co. look poised to retain the current policy throughout the remainder of the year.
  • Even though Australia’s Consumer Price Index (CPI) is anticipated to pick up to an annualized 1.1% from 1.0% in the second-quarter, the core rate of inflation is projected to hold steady at an annualized 1.7%, but a deviation from market expectations may heavily influence the near-term outlook for the exchange rate as the RBA expects the low-inflation environment ‘to remain the case for some time.’
  • Broader outlook for AUD/USD remains constructive as it preserves the upward trend from earlier this year, but a move below 0.7590 (1000% expansion) to 0.7600 (23.6% retracement) raises the risk for a test of trendline support, with the next downside region of interest coming in around 0.7530 (38.2% expansion).
CurrencyLastHighLowDaily Change (pip)Daily Range (pip)


NZD/USD Daily Chart

Chart - Created Using Trading View

  • NZD/USD may continue to give back the rebound from the monthly low (0.7035) as it carves a recent series of lower highs & lows, while there’s growing speculation the Reserve Bank of New Zealand (RBNZ) will deliver another rate-cut at its last 2016 policy meeting on November 10 as the central bank persistently warns the ‘current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range.’
  • However, with Overnight Index Swaps (OIS) highlighting an 84% probability for fresh record-low rates in New Zealand, the policy statement accompanying the rate-decision may ultimately have a greater impact on the exchange rate should Governor Graeme Wheeler and Co. point to an upcoming shift in the policy outlook.
  • Will continue to watch the downside targets as a head-and-shoulders pattern appears to be also in play, with a break/close below 0.7040 (50% retracement) raising the risk for a move back towards the July low (0.6951), which coincides with a longer-dating Fibonacci retracement around 0.6950.
  • The DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-short AUD/USD since October 14, with the ratio hitting a near-term extreme of -1.80, while traders have flipped net-short NZD/USD during the previous week.
  • AUD/USD SSI currently sits at -1.02 as 50% of traders are long, with short-positions 3.8% lower from the previous week as open interest stands 9.6% below the monthly average.
  • NZD/USD SSI currently sits at -1.21 as 45% of traders are long, with long positions 21.1% lower from the previous week, while open interest stands 1.9% below the monthly average.
  • May see market participation continue to wane going through the last full-week of October.

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--- Written by David Song, Currency Analyst

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.