Currency Updates:
It looks like it might soon be time to start easing back on AUD shorts with solid buying interest and some technical factors indicating that further losses in the very short-term might be very hard fought. Yesterday’s Chinese data sent the Aussie lower but that is very quickly forgotten in the FX market and all eyes now turn to the CPI data today. Overnight manufacturing data from the EZ was below expectations whilst this morning the RBNZ left rates unchanged as expected.
TECHNICALS: The short-term technical outlook for AUD/USD (see chart) suggests that it may have fallen far enough for now and I favour reducing shorts now ahead of 1.0220 and looking to re-sell near strong resistance (trendline, 38.2% Fibo and recent highs) at 1.0360.
CROSSES: AUD/JPY is still looking technically quite bearish whilst below 103.00 after a short-term double top formed at a 61.8% retracement level (see chart). The longer-term trend is bullish so bears need to pick their entry levels carefully and keep stops relatively tight in case the bull trend re-emerges.
EUR/AUD broke above recent resistance levels but failed to consolidate those gains and has slipped back to mid-range levels (see chart). I still am sticking with my preferred buy-dip strategy here.
ORDERS & FLOWS: Very solid corporate buying interest near 1.0220/30 has held the AUD/USD up but hedge funds and CTAs are still looking to sell rallies according to interbank reports. Asian Sovereign names including China were noted buyers of EUR/USD below 1.2980.
INTRADAY CONCLUSION: I suggest a broad 1.0220/1.0360 range and whilst I doubt that we will get to the edges of this, I still recommend patience in seeking a good entry level. Slight bias to the topside today, as short-term market might already be a little short.
TRADE OF THE DAY: Normally if China is involved in a market it’s worth going with them. Buy EUR/USD near 1.2975 with a tight stop looking for a quick 50 pip rally; rinse and repeat!
Good luck out there.
