Westpac’s Head of Research Rob Rennie and Currency Strategist Sean Callow were out of the blocks quickly after the Australian CPI and Chinese PMI data, suggesting the downside might have opened up a little for the Aussie dollar after both prints.
From their report:
The sharp downside surprise on the core inflation readings sparked a quick selloff to around 0.9320. The attempt to hold this support level only lasted until the China PMI data, which saw another round of AUD selling to 0.9300 despite meeting consensus on the headline reading.
We argued back on the 11th April … that the A$ would likely “spend some time in the 0.9300/ 0.9500 region” and that the A$ was “well overdue a correction”. At the time, we saw 0.9280/ 0.9300 as important support for AUD/USD.
These levels still stand, however today’s data arguably increases the arguments for a continuation of this correction. A ‘close’ below 0.9280/ 0.9300 would argue for a continuation of the move down towards 0.9190/0.9210. However, we would certainly not argue for a more aggressive move beyond that point – that would require stronger US data and weaker Chinese data.
The Aussie is currently sitting just above Rennie and Callow’s level of 0.9280 at the moment.
We’ll see what Europe does when it they head in to their desks in a couple of hours.