Currency Updates:
AUD/JPY returned to the fore on Friday night after a better than expected non-farm payrolls number in the US. The bears who had been trying to force AUD/USD below 1.0220 for the entire day on Friday were forced to cover and both AUD/USD and USD/JPY rallied in tandem as the risk-trades came back into focus.
There are still some Asian golden-week holidays today and most of the action in the AUD will be positional adjustment ahead of the RBA tomorrow. We also have important domestic data, led by retail sales, so it should be a busy session.
TECHNICALS: The bullish AUD/USD case is looking stronger today after support at 1.0220 held for the second time opening up the possibility of a short-term double bottom (see chart). The important resistance levels to watch are at 1.0385/1.0400 so it should be a battle royale to maintain control (although once again the range-traders look to have the best cards!). The very short-term levels to watch for day-traders are at 1.0280 and 1.0325.
CROSSES: AUD/JPY looks to have rejected the idea of consolidating below 100 and has bounced sharply, although I still favour further range trading in a broad 99.50/103.50 range (see chart).
AUD/NZD remains bearish but bearish momentum remains very sluggish and I do not discount the possibility of a sharp 300 pip short-covering rally.
ORDERS & FLOWS: The very heavy bids (including some notable Sovereign names) at 1.0220 proved too big for the bears and a nasty rally ensued when the shorts tried to cover after the NFP. Sell orders were reported on Friday starting at 1.0330 but no word yet on whether they are still live or not.
INTRADAY CONCLUSION: We should see some volatility in the AUD today despite the Japanese holiday. Retail sales data may yet influence the RBA decision for tomorrow and we should see plenty of positional readjustment. I remain in the AUD bearish camp, but I prefer to trade this view through the crosses, EUR/AUD in particular.
TRADE OF THE DAY: There was a very nice bounce in USD/JPY on Friday but the easy money has been made there now so we must look elsewhere. As I said, I prefer the sell-rally play for the AUD so I suggest buying EUR/AUD on intraday dips to 1.2680 with stops below 1.2640 looking for 1.2800.
