The Australian Dollar hit and bounced from the US$0.7000-15 objective on Thursday, its lowest point since late July; however, the market may question whether we have witnessed a dead cat bounce?
A ‘Dead Cat Bounce’ is a market jargon for a situation where an asset/currency or an index experiences a short-lived burst of upward movement in a predominantly downward trend.
It is a temporary rally in the price of a security or an index after a major correction or downward trend.
Australia recorded the most significant quarterly rise in inflation since 2006, after a better-than-expected Australian consumer price index (CPI) inflation rose 1.6% quarter-on-quarter in the third quarter, an improvement from the 1.5% forecast, following a record fall in the previous quarter of -1.9%.
Meanwhile, the Reserve Bank of Australia’s (RBA) trimmed-mean CPI increased 0.4% quarter-on-quarter versus a 0.3% forecast and -0.1% previously.
Although the data release is a welcoming development, the upbeat data may not be enough to deter the RBA from reducing rates to a record low of 0.1% from 0.25% in November.
From a technical perspective, further bearish traction is expected with the objective at US$0.7000-15 currently viewed for the challenge.
From the given broader assessment, along with the posted outside range day should increase further bearish challenges, which is expected to lead lower to the broader target of US$0.6900-45.
The resistance is located at US$0.7060-75, with the downtrend and the 60-day simple moving average (SMA) seen above at US$0.7160-80.