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Talking Points:
- AUD/USD Technical Strategy: Flat
- Australian Dollar drops to monthly trend support after soft 1Q CPI data
- Waiting for improved risk/reward to sell in line with long-term trend
The Australian Dollar turned lower against its US counterpart as expected after putting in a bearish Evening Star candlestick pattern. Prices are now challenging support capping the downside since early March. The move lower followed a disappointing set of first-quarter CPI figures.
Near-term trend line support is at 0.7549, with a break below that on a daily closing basis opening the door for a test of the 38.2% Fibonacci retracement at 0.7450. Alternatively, a reversal back above the 14.6% level at 0.7688 paves the way for a challenge of the 38.2% Fib expansion at 0.7834.
Risk/reward considerations argue against taking a short position in line with our 2016 fundamental forecastas prices sit squarely at support. We will remain on the sidelines for now, waiting for an actionable opportunity to sell AUD/USD to present itself.
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