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Australian Dollar sold heavily on inflation data

By SHAMEEM MUSA

The Australian dollar collapsed through trade on Wednesday plunging below key technical supports on the back of a softer than anticipated quarterly CPI print. Inflation wrote in below market expectations and all but closed the door on the RBA bringing forward changes to monetary policy as wage growth, consumer spending and price pressures remain stubbornly flat. Diving through key supports at 0.7730 the AUD consolidated the downward move touching intraday and three month lows at 0.7691 and appears vulnerable to further loses with the next support point at 0.7665 and 0.7630. A break below such levels would affirm a deeper bearish channel and open the door for moves back toward 0.75. Attentions now turn to key U.S GDP data Friday and the highly anticipated appointment of a new Fed president as markers that could force the AUD lower still. 

The New Zealand Dollar extended losses overnight testing six month lows of 0.6865 as political developments continue to hamper any demand back to the 70 US cent handle. Opening the morning at 0.6905, the Kiwi continued its slide following the announcement of the new ministerial government and their portfolios with First Party leader Winston Peters appointed as deputy Prime Minister. The NZD/USD cross hit an eventual low of 0.6865 in the North American session as a number of positive leads including Durable Goods Orders strengthened the greenback. Further direction will be dependent on the release of NZ trade balance figures this morning. The New Zealand Dollar opens at 0.6885.

The Great British Pound is stronger today when valued against its US counterpart reaching an overnight high of 1.3271, its highest since October 17th. The rally in the Sterling was on the back of better-than-expected UK GDP data which increased by 0.4% in the third quarter (July to Sept), a similar rate of growth to the previous two quarters and above the 0.3% forecast. On a yearly basis the UK economy grew by 1.5%, slightly below the 1.4% expected. The UK macroeconomic calendar has little to offer today with no scheduled data releases. The GBP/USD pair is currently trading at 1.3259. We now expect support to hold on moves approaching 1.3220 while any upward push will likely meet resistance around 1.3270. 

The Euro has found some upside when valued against its US counterpart over the past 24 hours, trading as high as 1.1819 versus the US Dollar. The greenback ignored  better than expected data releases, US Durable Goods Orders rose by 2.2% in September well above consensus expectations and New Home Sales numbers increased by 0.7% in August. ECB takes centre stage tonight, with the Governing Council widely expected to announce changes to its QE Programme. While up until a few weeks ago, the consensus was still looking for six months extension of QE at €40bn, the expectations have moved towards a longer extension. We expect EUR/USD to remain supported around 1.1795 at least until the meeting, resistance levels could be seen at 1.1835 followed by 1.1855.