AUD/USD – Sinks on weaker M/M Retail Sales

Australia March’s Retail Sales came in at -0.4%, a surprisingly underwhelming result versus expectations of a 0.1% rise, pushing price below 1.03 convincingly. However, it is important to note that the M/M data has been seasonally adjusted. The Q/Q figure was actually much stronger, coming in at 2.2% vs an expected 1.7%, and much higher than previous quarter’s 0.1%. Depending on how important you think seasonality is, the retail sales data can actually be interpreted as optimistic or pessimistic.

Hourly Chart

Looking at the reaction of AUD/USD following the news release, it is clear that market chose to interpret the data as negative. However, that shouldn’t come off as a huge surprise due to the fact that AUD/USD remain heavily bearish despite the rally we saw late on Friday.

Prices rallied strongly on US NFP data, ending on 1.032 close to Friday’s high after NFP data turned out to be hugely positive. Despite having such strong winds behind their sails, bulls were unable to tag the 1.033 support turned resistance that has been in play midweek. Perhaps the reason why the bullish rally failed to accomplish anything more than the 60 odd pips rally can be attributed to the low expectations that traders were having. The numbers are certainly better than estimated consensus, especially given the fact that ADP Employment numbers that were released on Wednesday were extremely dismal, hence even if NFP numbers have hit analysts consensus estimate, there would have been more than a likely chance that price would have rallied – which is in no way suggesting that long-term outlook for US will be good.

In any case, the failure to test 1.033 and break it is a strong statement for the underlying bears, which were still in play after the slide from 1.035 back on 1st May. From a Technical perspective, it is clear that price was already wishing to test the 1.03 levels during early Monday trade, almost looking like a drunkard waking up in the middle of nowhere and immediately regretting the previous day decision. Given such overall bearishness, a broad pessimistic interpretation of current ambiguous Retail Sales data seems rather logical.

Current price has rebounded from the 1.275 line and is also supported by the Red Kijuu-Sen. With current forward Kumo still a bullish one, coupled with the fact that price tends to be “directionless” within Kumo, perhaps AUD/USD bulls may still live another day before other strong fundamental push is able to drive price below 1.027 and preferably breaking the Kumo for a retest of 1.022.

Daily Chart

Daily Chart is still looking bearish after the rejection from the Kumo. Stochastic readings is now pointing marginally downwards, which suggest that price may test 1.022 eventually and potentially break further for an extension of the fall back from April’s high.

Fundamentally, is Australia doing well? ANZ Job Advertisements numbers continue to shrink, showing the 12th decline within the past 13 months, with Feb’s data the only positive exception, suggesting that the labor market in Australia may not be as strong as before. Furthermore, China’s growth is now in doubt, with PBOC’s Zhou stating that slower growth should be expected in the coming few years as China consolidate herself. Given all the doom and gloom internally and externally, one really wonders if Australia’s economy will be able to be as robust as before. Well, with RBA decision coming tomorrow, we will at least be able to see what is RBA’s take on the situation. Thursday’s Employment Data will also provide us further insights on the state of affairs internally, and will most likely help price to break 1.022 if it hasn’t already done so should employment numbers disappoint just like last month.

More Links:
AUD/USD – Moves Back Above 1.03
EUR/USD – Moves Back Above 1.31
Week in FX Asia -Yen Bears Are Beginning To See The Light

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