Currency Updates:
With a week of holidays in China and Japan, the Asian FX market seems quite happy to sit quietly on its hands ahead of central bank meetings later this week. The ECB is expected to signify some imminent change to its refi rate, either in May or June. The AUD is being bounced around by flows and positional adjustments but I maintain my bearish medium-term outlook amidst falling commodity prices and a slowing Chinese economy.
TECHNICALS: Technical resistance in the form of recent highs and a 38.2 % retracement level is capping for now at 1.0360 (see chart). The next resistance level above there is at 1.0400. Support levels are similarly clear at 1.0260.
CROSSES: AUD/JPY is in sideways mode, just like the rest of the market, and the parameters to watch there are broadly between 100.50/102.50 in the short term (see chart).
EUR/AUD is still broadly bullish but may be in for a shake-out depending on what happens at the ECB meeting.
AUD/NZD has been very bearish in recent weeks but seems to be running out of momentum and is trying to form a base above 1.2050.
ORDERS & FLOWS: Stops reported (unsurprisingly) above 1.0370 but hedge funds were noted sellers overnight near 1.0355. Local banks report more decent selling interest near 1.0390/00.
INTRADAY CONCLUSION: We will see more range trading across the major pairs and any movement will be determined by one-off flows and stop-loss hunts. I prefer to be short AUD/USD ahead of 1.0360 but with very tight stops above. Any dips back toward 1.0300/10 will attract short-coverers for sure, so it’s hard to get away from the overwhelming range-trading bias.
TRADE OF THE DAY: I’m looking to another of my ‘pet’ trades here, and suggest buying USD/CHF near .9330 with a tightish stop below .9300 looking for .9420.
