AUD/USD down 45-pips from highs; short-sellers targeting 0.7615

Currently, AUD/USD is trading at 0.7651, down -0.04% or (3)-pips on the day, having posted a daily high at 0.7699 and low at 0.7636.

The Australian dollar vs. American dollar drifted towards the 0.7650 region after 3-consecutive failed attempts to break above 0.77 which translate into a critical resistance level. On the data front, the ISM Manufacturing PMI clocked a positive result at 57.7 or +1.1 above both consensus and previous.

Recession avoided, but for how long?

Dana McCauley reported on the latest growth figures in Australia, "The national accounts released today reveal that Australia’s economy grew by 1.1% in the last quarter, after slipping 0.5% in the three months to December 1."

McCauley further writes, "Australia’s terms of trade — the ratio of the nation’s export prices to its import prices grew by 9.1%, thanks to strong price rises in coal and iron ore, marking a 15.6 per cent improvement on the December 2015 quarter. The nation’s GDP has now grown 2.4 per cent through the year, while its nominal GDP evaluated at current market prices grew by 3.0% to be 6.1 per cent higher."

AUD: Supported by the strong GDP numbers - BBH

Historical data available for traders and investors indicates during the last 9-weeks that AUD/USD pair, a commodity-linked currency, had the best trading day at +1.18% (Jan.17) or 89-pips, and the worst at -0.81% (Jan.18) or (61)-pips. Furthermore, the US 10yr treasury yields have traded from 2.46% to 2.39%, up +2.70% on the day at 2.45% or +0.0645.

Technical levels to consider

In terms of technical levels, upside barriers are aligned at 0.7740 (high Feb.23), then at 0.7777 (high Nov.8) and above that at 0.7834 (high April.21). While supports are aligned at 0.7617 (low Feb.14), later at 0.7516 (100-DMA) and below that at 0.7457 (low Jan.16).

On the other hand, Stochastic Oscillator (5,3,3) seems to shift direction to head south. Therefore, there is evidence to expect further Aussie losses in the near term.

On the long term view, if 0.7834 (high April 2016) is in fact, a relevant top, then the upside is limited at 0.7809 (short-term 38.2% Fib). Furthermore, RBA's Lowe removed from the table any further 'easing' via rate cuts, however, the interest rate advantage that favors the Aussie should decrease organically as the Federal Reserve continues increasing rates with '3-hikes' in the next 16 months.

To the downside, supports are aligned at 0.7433 (short-term 23.6% Fib), later at  0.7182 (reverse long-term 61.8% Fib) and below that back to 0.6826 (low Jan.2016).

AUD/USD analysis: losing attractive, but bearish only below 0.7600