The Australian dollar dropped against most of its major trading partners last night after Australian CPI declines to 0.6% from 0.8%. The surprise drop pretty much removed any opportunity for the RBA to tighten in the near future. The RBA is likely to jawbone the currency lower and we may see macro traders avoid long Aussie dollar positions.
Price action on the AUD/USD daily chart is highlighting the key breakdown of the .9300 support level. This area a couple weeks ago was heavily defended as resistance and pretty much opened the door for a 100-pip move once breached. The bullish channel may ultimately be breached this week and a move may target the 200-day SMA at .9153. If downward pressure continues, major support will come from the 100-day SMA and psychological .9000 -.9030 area. Ultimately, we may see the RBA do its best talking down the Australian currency back towards the 2014 lows. If the bullish channel is respected and price can recapture .9350, price may continue to consolidate between .9300 and .9420.
The trade: Sell AUD/USD at .9285 with a stop loss at .9355 and a take profit at .9050. The Risk/Reward Ratio is a little better than 1:3
Edward J. Moya
WorldWideMarkets Online Trading