The Australian dollar continues to be controlled by the bears as it looks set to close below the 38.2 fib retracement line, as a combination of a stronger USD based on increased betting in a FED rate hike and weakness in the Australian economy take its toll on the economy. However, the next 12 hours are likely to set a precedent for momentum for the AUDUSD as capex data is expected to be released and retail sales; in addition Chinese data is also out on Manufacturing with expectations it will show a minor contraction. Capex data and retail sales for me will be the big mover, as capex data will show overall investment internally from firms in the Australian economy and will be an indicator if firms are looking to increase that investment. Expectations are however low with a predicted reading of -4.2% q/q. Retail sales however are also expected to dip to 0.3% and this will have a large impact on the appetite for Aussie bulls if that is indeed the case.
Technically speaking it’s very much a bearish trend for the AUDUSD as it continues to slip down the charts. Expectations are now building around the 50.0 fib level at present as it looks likely we will see the AUDUSD look to test this key level at 0.7450 as the bears look to take a big swipe out of the commodity currencies. It’s possible that we will see a sharp pull back from this point up the charts to the 38.2 retracement level and then further bearish momentum back down the chart as traders look to take a breather and the possibility of rate hikes increase for the USD adding further fundamental pressure.
Oil markets jumped sharply into the red today as expected crude oil inventories showed a large build up of 2.28M barrels (0.92M exp). This is a slightly smaller increase than the previous week, however it’s still a large build up and to add further fuel to the fire recent OPEC data showed production at record levels as they globally pumped 40K more barrels in August than July, putting total production at 33.50Mbpd. Output has so far been limited in Nigeria and Libya, but they have a large amount of production capacity and it is looking like only a matter of time before the pressure comes on them and they look to rapidly increase production. This in turn could put real pressure on oil bulls and the bears look likely to be in for a field day.
Market movements have so far been very much in favour of the bears with the H1 chart showing big swings on news out of OPEC and oil inventories. Expectations are now building that we will see oil look to push the key support area of 44.50 as the bears look to push oil lower. With the USD strengthening and production increasing it is creating a very bearish scenario for oil traders and even the technical’s are showing strong signs that the bears are likely to stay in control for some time.