AUD outlook: QE, RBA, Commodities, China, and the weekly wedge

There are plenty of factors affecting the AUD at the moment:

• Easier policy from the Fed and the BOJ is risk-trade and AUD positive.
• The RBA is likely to cut rates by 50 bps in the next 3 months but may not start until November. Overall this should be AUD negative but much is already written in and there is still some uncertainty.
• Oil and Iron Ore have been very volatile in recent times and the AUD is swaying with the punches.
• The Chinese economy has hit a road-bump but is still growing at a very respectable pace. The question here is how much optimism is built into the currently ueber-strong AUD.

In other words, range-trading is a very sensible play. Short-term support has now emerged at 1.0400 and some heavy GBP/AUD selling overnight also gave the AUD a boost. Nevertheless there were plenty of sellers lined up above 1.0500 and they easily capped the rally.

Overall I still think we are due for a test of the weekly wedge highs near 1.0700 but I don’t fancy entering a long position until stronger support levels near 1.0335 are tested.