Aussie Weakness via AUD/USD, EUR/AUD, GBP/AUD Driven by Data, Techs

Talking Points:

- AUDUSD sees short covering rally at yearly low.

- EURAUD and GBPAUD flagging after breaking 2014 downtrends.

- We started to short AUDUSD in the second week of September.

The Australian Dollar stumbled into October, setting fresh weekly lows against several of the major currencies overnight and coming within 3-pips of its yearly low against the US Dollar. The Aussie breakdown has been driven both fundamentally and technically.

The bearish technical perspective on the Aussie has been apparent since early- to mid-September, when a head & shoulders topping pattern emerged. Since then, we've noted that in what has become a breakout/momentum favorable market, the AUDUSD has been respecting its daily 8-EMA as trend resistance.

The bearish fundamental perspective is much more near-term, with several pieces of data last night pulling the rug from the antipodean currency. You can see the items in the DailyFX Australian Dollar Economic Calendar.

With the Credit Suisse Overnight Index Swaps showing the market only pricing in a 1.0% chance of a 25-bps rate cut at the next RBA meeting and only +2.0-bps priced in over the next 12-months, a great deal of the fundamental pressure currently on the Australian Dollar is emanating from exogenous sources (i.e., selling of high beta names due to speculation over Fed tightening monetary policy).

See the above video for technical considerations and trade ideas in AUDUSD, EURAUD, and GBPAUD.

Read more: Next EUR/USD Leg Lower Begins; Trade Opportunities in EUR/AUD, EUR/GBP

--- Written by Christopher Vecchio, Currency Strategist

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