Currency Updates:
There was plenty of action in the crosses overnight and the AUD was firmly in the spotlight. EUR/AUD made a sharp move higher after the recent consolidation range was broken and AUD/CHF bore the brunt of risk-averse sentiment. The FOMC left US monetary policy unchanged and a spate of disappointing US economic data affected the traditional risk trades.
It should be a busier session today with China returning after a 3-day holiday and Chinese manufacturing PMI on the economic calendar.
TECHNICALS: Make no mistake, we are still very much in range trading mode in the AUD/USD (see chart) and unfortunately we will only know it’s broken after the fact. Nevertheless, the fact that the major moving averages have capped the recent rally may be a sign that the bears are taking control and I remain bearish for a move back below 1.0000.
CROSSES: EUR/AUD has broken above recent highs at 1.2750 and my next target is at 1.2950 (see chart). Support levels start at 1.2770 and get stronger below 1.2700.
AUD/CHF has broken and closed below recent daily lows at .9545. This cross has come in for some very heavy selling in the last few sessions and should be watched closely.
AUD/JPY has broken trend-line support (see chart) and will open near the important 100.00 level.
ORDERS & FLOWS: All about the crosses overnight, with heavy selling seen from US-based investment funds across all of the AUD crosses. In the AUD/USD, corporate and Sovereign bids are still expected near 1.0225 but dealers say that order books are also heavy with offers above 1.0330.
INTRADAY CONCLUSION: I still much prefer the short AUD trade and it’s a matter of picking your counter currency. If USD/JPY breaks below 97.00 then we can expect more liquidation of longs in pairs like AUD/JPY as well. A poor China PMI number will only add to the bearish momentum.
TRADE OF THE DAY: Sell AUD/USD on any intraday rallies towards 1.0320, with stops above 1.0375 looking for a 1.0225 re-test.
