RBA Index of Commodity Prices Declines, AUDUSD Intraday Outlook

by on February 3, 2014 10:34 am BST

The index of commodity prices in Australia declined 1.5 percent on a monthly basis with a one percent decline in December, according to the Reserve Bank of Australia (RBA) preliminary data. Australia has fallen hard since the mining boom-turn-bust, and January declines were led by coking coal and iron ore. Year-over-year, the commodity price index fell 9.9 percent in SDR terms (Special Drawing Right) but increased 6.6 percent in Australian dollar terms.

The AUDUSD was down mildly after the data release, lower by .12 percent to .8742. The pair has rebounded since making another new low of .8659, but price action resistance has been priced in on the 4H chart at .8770 with secondary resistance at .8820. The 50 EMA is budding up against the first resistance level, which could add push-back. However, if .8770 is taken out, the AUDUSD will likely test the 72 EMA at .8790.

If resistance can hold, the AUDUSD could trend lower and retest .8700, where the ascending trend line extends the pair’s new low. There remains little action pre-London session, but this morning is filled with European and US manufacturing PMIs. If negative, risk could be off the table, and Aussie could be a casualty.

Also later today,the RBA will has their cash rate decision followed by a statement. It is likely that the central bank will lower the benchmark rate from historical lows, but traders will watch the RBA’s language and if a rate cut is a viable option given recent poor data. Expect high volatility prior to the release.

4H Chart of AUDUSD

4H Chart of AUDUSD