By Fast Brokers – The Aussie has been driven towards a test of its psychological .85 level after the SCI tumbled by nearly -5% on fears of a slowdown in China. China’s leading economic indicators cooled, showing the global economy’s engine of recovery is slowing down. A slowdown in China would be natural considering recent real-estate measures and appreciation in the Yuan. Since Australia’s impressive economic performance has been driven by Chinese demand for commodities, weakness in China tends to have a direct impact on the Aussie. After all, strong economic performance has yielded interest rate hikes at the RBA, hence the Aussie’s rally over the past year. Meanwhile, the risk trade as a whole has been hit by uncertainty in the EU. Spain has requested that the ECB keep its emergency window open, raising concern that Spain’s financial industry is not stable enough to stand on its own two feet. Moving further West, America’s CB consumer confidence figure came in much lower than anticipated, revealing more cracks in the U.S. recovery. America will also release its ADP employment figure tomorrow, meaning markets should remain active over the next 24 hours. Australia will also release new home sales and private sector credit data tomorrow. It will be interesting to see whether interest rate hikes at the RBA are slowing down Australia’s housing market. If so, the RBA would be less incline to raise again in July, a negative for the Aussie.
Technically speaking, the Aussie faces technical barriers in the form of 6/14 and 6/28 highs. Additionally, the highly psychological .90 level should serve as a solid barrier should it be tested. As for the downside, the Aussie is testing its highly psychological .85 level and has technical supports in the form of intraday and 6/11 lows.
Resistances: .8549, .8565, 8587, .8613, .8633, .8671, .8690
Supports: .8523, .8500, .8461 .8431, .8396, .8363, .8350
Psychological: .90, .85
(click chart to enlarge)
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