AUD/USD unchanged near 0.7680; RBA's Lowe finally admits 'household debt' risk

Currently, AUD/USD is trading at 0.7674, down -0.01% or -0.5-pips on the day, having posted a daily high at 0.7674 and low at 0.7673.

Today's NA trading session experienced a brief US dollar comeback as treasuries recovered. Furthermore, the Australian dollar vs. American dollar erased losses as the pair bounced off lows near 0.7648.

The AU economic docket had traders and investors prepared to pick any changes in the rhetoric from RBA's Lowe; he finally added more on Australia's household debt. As reported by The Sydney Morning Herald, "It is difficult to quantify this risk, but it is one that is difficult to ignore. High household debt levels could hurt the economy," Governor Philip Lowe commented.

Although the central banker diminished any further rate cuts, there is evidence to expect slow down in the economy as household are pushed to adjust their spending patterns.

AUD/USD analysis: no progress made, but downside still limited

Historical data available for traders and investors indicates during the last 8-weeks that AUD/USD pair, a commodity-linked currency, had the best trading day at +1.18% (Jan.17) or 89-pips, and the worst at -0.81% (Jan.18) or (61)-pips. Furthermore, the US 10yr treasury yields traded from 2.45% to 2.41%, up +0.59% on the day at 2.42% or +0.0143.

Technical levels to consider

In terms of technical levels, upside barriers are aligned at 0.7731 (high Feb.16), then at 0.7777 (high Nov.8) and above that at 0.7834 (high April.21). While supports are aligned at 0.7617 (low Feb.14), later at 0.7512 (100-DMA) and below that at 0.7459 (50-DMA). On the other hand, Stochastic Oscillator (5,3,3) seems to head south. Therefore, there is evidence to expect further Aussie losses in the near term.

On the long term view, if 0.7834 (high April 2016) is in fact, a relevant top, then the upside is limited at 0.7809 (short-term 38.2% Fib). Furthermore, if the RBA has 'no ammo' nor solid reasons to increase rates in 2017, the interest rate advantage should decrease organically as the Federal Reserve continues increasing rates with 3-hikes in the next 16-months. To the downside, supports are aligned at 0.7433 (short-term 23.6% Fib), later at  0.7182 (reverse long-term 61.8% Fib) and below that back to 0.6826 (low Jan.2016).

Bond market still not on board with a March rate hike