Here’s an excerpt from Gov. Phillip Lowe’s address to the Australian Business Economists Annual Dinner last week, “If the economy continues to improve as expected, it is more likely that the next move in interest rates will be up, rather than down. But the continuing spare capacity in the economy and the subdued outlook for inflation mean that there is not a strong case for a near-term adjustment in monetary policy.” Full speech here

So this does not say that we are expecting a hike at the next RBA meeting though we do have an RBA meeting coming up on the 5 December. How is the market going to position itself as we head into this meeting? The only inflation-related data we will see before the next meeting is retail sales which is due to be released on the day of the meeting.

With the release of dovish FOMC minutes last week, market participants may see a less aggressive path for US rate hikes in 2018 and therefore look to capitalize on the higher interest rate differential of the Aussie against the Buck over the coming weeks. Perhaps Gov. Lowe’s comments help fuel a rally. Maybe we continue to see continued appreciation in both Aussie and Kiwi in the weeks ahead.

In a post I uploaded last week I discussed a move higher in Gold and Copper potentially resulting in a stronger Aussie with Kiwi following suit due to antipodean correlation, a day or two later price double bottomed and made a higher high on AUDUSD and NZDUSD. Since that post Gold has still failed to break out though we continue to see strong bids and are not making lower lows, Copper has moved higher off the support as per the analysis provided in last week’s post and we have seen a move higher in the Baltic Dry Index from the 16 November, which of course correlates with the move higher in Copper at around the same time. (Last week’s post)

As far as technicals are concerned, Bulls aren’t out of the woods yet though recent price action is definitely worth paying attention to. I have not included AUDJPY or NZDJPY in this post as neither of those pairs have made a higher high yet on Daily, H4 or H1. I will post an update to this plan once that has happened.

AUDUSD Daily

The only thing bullish on this chart is price. Stochastic moving up and a 5/8 cross to the upside. However, the market is bearish with the 21 clearly below the 55 and price has failed to break through role reversal resistance and is coming down off the 50% fib. Bears have a clear target of the 138.2% fib extension which is also MS2 (the target off of MPP). There is no reversal pattern on this time frame and therefore nothing on this time frame says reversal. See H4 for further analysis.

AUDUSD H4

There are three options for Bulls. Go long at 0.76 (risky due to Daily chart analysis so manage risk accordingly), wait for a break above 0.7650 and trade the pullback (a much safer option as 0.7650 is a level of resistance that when broken will indicate this pair is no longer bearish) or if you see the move lower continuing until Bears have reached their monthly target as per the daily chart, a counter-trend trade at MS2. One would pay attention to bullish tactical setups at each level of support before entering a trade and manage risk accordingly. (Note I have indicated the drop at last week's WM3 for Bears - this is the 61.8% reverse fib and is just there to indicate a drop if this reversal fails, this is not an indication of where price will drop, Bears would pay attention to new weekly pivots and then plan their trade accordingly)

NZDUSD Daily

0.6800 marks the bottom of the range as indicated in last week's plan. Nothing on this chart says bullish besides price. Pivot points say Bears have a target of 161.8% fib extension/ MS2 due to the drop off of the 38.2% fib/ MPP/ 21 earlier in the month.

NZDUSD H4

Similar to AUDUSD, Bulls have three choices. Go long at 0.6850 (if price comes back down), wait for a break above 0.6900 and trade the pullback or wait for Bears to reach their MS2 target and look for a counter-trend trading opportunity. Keep an eye on new weekly pivots and confluence of support with 0.6850 and MS2.

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