AUD/USD – Higher Westpac Leading Index for Feb

Australia’s Westpac Leading Index (Feb) increased to 0.6% M/M versus last month’s (Jan data) 0.3%, which has also been retrospectively revised to 0.4%. This is the highest level since Nov 2012, and suggest that Australia’s economy is remaining robust in early 2013. Despite the fact that this index is designed to predict future direction, reaction to this stronger figure is muted as most of the fundamental data used to produce the headline data has already been released to the public. Also, this leading index does not take into consideration the latest data that we currently know: lower employment figures, lower manufacturing index, lower commodity prices etc. Hence it is no surprise that price did not trade higher, but instead continued lower after facing slight resistance around 1.04.

Hourly Chart

From a technical perspective, current price is on the verge of breaking below the rising trendline following the rebound from 1.04. However, the angle of current rising trendline is highly subjective, and price could appear to be above the trendline if the gradient of trendline lowers by even 1 degree. As such, more confirmations should be sought before assuming that the current recovery rally has stalled. Stochastic readings does suggest that price has the possibility of breaking lower with readings signalling a bear cycle. However, it is worth noting that current readings are around the previous 2 interim trough levels, and we could still potentially see readings rebound higher from here – implying that price could similarly trade higher above the rising trendline.

Daily Chart

From the daily chart, we can see 3 Black Crows bearish reversal pattern with the last crow closing just above 1.035. It is unfortunate that the last crow did not manage to close below the 1.035 and 50% fib confluence as that may result in strong continued bearish momentum towards 1.03 and potentially testing further lower objectives. Stochastic readings would have been on the side of bears with readings still firmly pointing lower. However, the above mentioned scenario didn’t occur, as bulls fought back valiantly, allowing the Mar rally to remain intact. Stochastic readings are still a fair distance from the Oversold region, however current readings are sitting around the same levels as the recent trough just under 40.0. Price levels back then are also fairly similar to current levels, hence it will not be surprising to see readings rebounding from here, or price trading higher towards 1.04 based on this interpretation.

Fundamentally, if the leading index can be trusted, Australia fundamentals appears to be stable at least for the 1st Half of 2013. However, with newer information coming in, that basis appears to be shaken. Even RBA has appeared to be slightly more dovish about both global and local economic outlook in its latest minutes, suggesting that weakness have crept in.

More Links:
AUD/USD – Recovers Back to its Old Trading Range Above 1.0360
EUR/USD – Surges to Seven Week High Near 1.32

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