FxWirePro: Weak consumer sentiment drags Aussie down after three days of gain

Bulls in retreat.

• As Australian consumer confidence printed the weakest reading in 18 months, the Aussie declined, trimming three days of consecutive gains on the back of a weaker USD.
• According to today’s release, the Melbourne Institute and Westpac Bank Consumer Sentiment Index for Australia plunged 4.8 percent month-over-month to 98.8 in March 2019 from 103.8 in the previous month. It was the lowest reading since September 2017, amid a slowdown in the domestic economy and a downturn in the housing market. Also, the survey's measure of economic conditions for the next 12 months dropped 4.5 percent and the outlook for the next five years fell by 2.1 percent.

However, bulls are not likely to give in easily.

• Like we said earlier that Aussie bears would struggle to clear key resistance around 0.7 area and more importantly the resistance zone near 0.67 area.
• One of the key factors fueling the bears is the possibility of further rate cuts by the Reserve Bank of Australia. However, we do not expect the central bank to jump and reduce rates as the last monetary policy statement was neutral in terms of policy outlook despite the fact that central bankers had their hands on the weak fourth-quarter GDP. In the final quarter of 2018, the Australian economy expanded at an annual rate of 2.3 percent, which was the weakest pace of growth since the 2nd quarter of 2017.

The Australian dollar is currently trading at 0.705 against the USD. A retest of 0.7 area looks very likely at this point.