"We've been hearing the central bank here talk down the Aussie for a while," said Stan Shamu, a Melbourne-based market strategist at IG Ltd. "A lot of people thought they'd wait and see what happened with the U.S. and tapering before taking action, and now it's really looking like the Aussie is in for a period of further weakness."
There are structural issues at play which favour a lower level for the Australian Dollar not least because the RBA is both talking and acting to send the currency lower. However, it is also worth remaining aware that sentiment deteriorates as prices decline which reflects how market participants have positioned themselves.
The Australian Dollar has steadied in the region of the August lows near 88¡é. While the medium-term outlook remains bearish, there is some short-term scope for a bounce. Against this background the performance of the S&P/ASX 200 is also noteworthy. It found support this week in the region of the 200-day MA and the psychological 5000 level, before rallying impressively. A sustained move below 5000 would now be required to question medium-term scope for additional higher to lateral ranging.
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