AUDUSD Bearish Breakout – Hits Seven-Month Low
- Data released overnight from the the Australian Bureau of Statistics has revealed that building approvals dropped versus expectations for January. Company gross profits also declined in the December reporting period, as earnings weakened in manufacturing and mining firms.
- The above has seen the Australian dollar/US dollar currency pair trade lower, with an initial breakout under the key consolidation support area around the 1.0150 mark. This area has previously seen demand during September and October of 2012.
- A breakout under this 1.0150 area also represents a break under the longer term (W1) ascending trend line, as per the weekly chart below.
- Price action around this area is viewed as key in the near term, with market participants looking to see whether there is a close under support, or whether a false breakout scenario is seen.
- Further to this technical breakout scenario, the key Australian dollar event risk this week is the Reserve Bank of Australia’s (RBA) monthly interest rate decision, due later this week.
- The consensus is that the RBA will keep interest rates on hold at the board meeting tomorrow, according to Credit Suisse data. The longer term view has the market pricing in two additional cuts of 0.25 percent, in 2013, potentially taking the cash rate to 2.5 percent. The RBA held borrowing rates unchanged last month.
Brad Styles, Forex-FX-4X.com, AUDUSD Analysis