USD Trading Outlook (13-10-2014)

AUD/USD The combination of China’s coal tariffs, soft Oz investment housing finance and a general risk-off theme saw Europe smash AUD/USD lower. Bears drove the pair towards 0.8725 into NY’s open. Commodity prices and equity futures were all in negative territory as NY got going so bears pressed the pair further. The pair sliced through s-t profit taking bids ahead of 0.8700 and hit a NY low of 0.8687. A bounce towards 0.8730 then took hold as the USD softened while stocks & commodities rallied a bit. The bounce was sold though as the pair sat near 0.8710 late in the day. The pair’s inability to clear 0.8900 resistance and slide back below the 10-DMA combine with a long upper wick on the weekly candle to put a bearish outlook back in play. Day/week RSIs are biased down again and yield spreads remain near recent tights. The pair will need a serious rebound in risk sentiment if it wants to rally. If not the 2014 low should be tested. A break of that low likely accelerates the l-t slide and the door to the May 2010 low opens wider.