The AUD/USD tried and failed to breakout through the lows. As we pull back and get set for a reload, the 0.7100 level starts to take on some more importance.

This week we have two important data points in CPI and retail sales.

The Australian economy is delicately poised at the moment as it is in the early stages of a property price decline. The property sector makes up a large portion of Australian wealth and if rates rise that will have a negative impact on investors and homeowners alike.

So a strong CPI print might be a benefit for the AUD/USD in terms of the likelihood of a rate hike. But it won’t be such a good thing for real estate and the broader economy.

To reiterate this point, we just saw building approval data come in at 3.3% vs 3.8% expected. A decent miss and adding to the issues.

Aussie Outlook

The AUD/USD is now looking at a test of 0.7025 with the target being the major level at 0.7000.

Price tried to breakout last week, but it didn’t follow through.

With that in mind, I am suggesting the 0.7100 level takes on extra importance. It to me is now the swing high. If we break that to the upside, then there is a chance of a short covering rally through 0.7150.

If it holds then we will continue to hold the downtrend. I’m looking to short at 0.7100 at the moment, if in fact we get back that high. Some USD weakness might just do it.