By Fast Brokers – The AUD/USD reversed sharply from its psychological .89 level after China shocked markets by increasing its required reserve ration by 50 basis points. By taking more hawkish monetary action a day before the Chinese New Year the government could be sending a message that it will pursue a more conservative monetary policy during the year of the tiger. The FX markets received China’s message loud and clear with the Dollar appreciating across the board. The Aussie also came under heavy selling pressure despite this week’s impressive employment data. Australia’s commodity-reliant economy is dependent upon demand from China. Hence, tighter liquidity in China could slow economic growth, thereby decreasing demand for Australia’s commodities and discouraging the RBA from raising rates by as much as it would like. Meanwhile, today’s EU data set disappointed with Prelim GDP data missing the mark. The disconcerting EU data added further downward pressure on the AUD/USD as the Dollar rallied in reaction. However, the Greenback has weakened a bit after U.S. retail sales surpassed analyst expectations. Hence, it will be interesting to see how the FX markets react to upcoming Prelim UoM Consumer Sentiment data. The data wire will be relatively quiet on Monday since the U.S. and China will be on holiday. Japan will release its Prelim GDP data during Monday’s Asia trading session, and if the numbers should deviate from analyst estimates this could yield a bit of volatility in the Dollar. Australia will enter the fray on Wednesday by releasing the RBA’s meeting minutes along with NAB Business Confidence data.
Technically speaking, the Aussie still has multiple downtrend lines serving as technical barriers along with 2/11, 1/29, and 1/28 highs. Furthermore, the psychological .89 level could serve as a technical barrier should it be retested. As for the downside, the AUD/USD as multiple uptrend lines serving as technical cushions along with intraday and 2/10 lows.
Price: .8825
Resistances: .8826, .8849, .8885, .8901, .8911, .8935
Supports: .8808, .8796, .8778, .8764, .8744
Psychological: .88, .89, February highs and lows.
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