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Recent Australian economic data favour a hawkish bias :

  The last monetary policy from the Reserve Bank of Australia (RBA) suggested a period of stability in interest rates, reducing the likelihood of further rate cuts. Furthermore, the recent economic improvements hint that the next move in rates will most likely be on the upside. Indeed, various leading indicators for unemployment signal significant improvements in the coming months, which would be earlier than the RBA currently expects. Furthermore, encouraging signs of a handover from mining-led demand growth to broader private demand growth could leave inflation close to the high of its 2-3% target. Meanwhile, the RBA is getting vocally worried about the housing market and the high level of household debt. Even though prudential tools could help, these would only be seen as a temporary solutions. As a result, there are clear risks that the RBA could start the tightening cycle earlier than the markets expect.

EUR/AUD exhibits a bearish head and shoulders :

   Looking at AUD crosses, the technical configuration in the last few months confirm risks of a further rise in AUD. Looking at EUR/AUD, the key support at 1.5031 has been broken, validating a 3 month bearish head and shoulders formation. The implied downside risk is 1.4229. As a result, a decline towards the key support area between 1.4218 (38.2% retracement) and 1.4051 is expected. Therefore, we would see any potential short-term bounce near the 200 day moving average as temporary. Resistances are given by 1.5161 (06/03/2014 low) and the declining trendline stemming from the recent lower high (around 1.5430). The head and shoulders also visible on AUD/USD, GBP/AUD and AUD/CHF favour a further decrease in the high number of short bets in the Australian dollar. 

To check the full forex performance results for the period 1/1/2013 - 21/3/2014 ( 15 Months ).

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