AU GDP Miss Undermines RBAs Gentle Turning Point

It didn’t take twitter long to react and compare the soft GDP read to RBA’s expectations. As we outlined yesterday, RBA gave themselves some very soft targets to hit and a long time to achieve them. Given they explicitly said publicly they’ll ease further if they’re not on track to hit these (soft) targets, it increases the odds for them to act sooner than the otherwise, cautiously optimistic statement suggested. Again, it underscores why we pay more attention to their speeches than their statements, as the latter tends to paint a rosier picture.

The next key data point for AUD traders this week is tomorrow’s retail sales whch is expected to rise to 0.3% from 0.2% prior, which leaves room for disappointment. Key data from the US data includes ISM non-manufacturing later today and of course NFP on Friday. Add into the mix Trump’s new relaxed approach to trade talks which is weighing on equities, then there’s a bearish case to be made for the Aussie over the near-term.

AUD/CHF is coiling up within a potential bearish wedge pattern. Since the 19^th November, there have been 8 sessions with high wicks which failed to close above 0.6785, making it an important level of resistance to monitor. In context of yesterday’s bearish outside candle and that today’s high is also below 0.6785 resistance, the path of least resistance could point lower.

However, for this to have a higher probability of success, we’d likely need to see trade headline continue to weigh on risk sentiment and retail sales miss the mark tomorrow.

• Bias remains bearish below 0.6795, although 0.6785 is also a resistance level to monitor to either aid with risk management, or use as a threshold to fade into whilst prices remains beneath it
• Initial target is the base of the wedge at 0.6688. Although if we’re in fact seeing a bearish flag, it projects target around 0.6600.

The ASX200 is on track for a bearish engulfing week (just two days into the week…). This would be the seconds bearish engulfing candle in three weeks if this turns out to be the case. We recently ran a test on a bearish outside week and concluded that they showed a higher chance of success if they close beneath the 10-week MA. When they didn’t, they showed positive returns the week after (ad indeed we saw the ASX200 rebound last week). Whilst we’re yet to repeat the test on a bearish engulfing candle, its worth noting that it is currently beneath its 10-week MA and on track for its most bearish week this year, after rolling over form all-time highs. So expect a follow up post on this pattern if it is confirmed.

Related Analysis:
RBA Hold Rates, Yet Could 'Ease' Their Way Into 2020
Historically, How Bearish Has A 'Bearish Outside Week' Been On The ASX200?
Weekly and Monthly Bearish Engulfing Candles Appear On DXY - But Just How Grizzly Are They?