Currency Updates:
USD strength has again been the main story in overnight trade with the greenback making solid gains against all the other major currencies. The market is regaining confidence in US assets and the talk that the Fed is soon to start tapering out of QE is increasing this confidence. Long term structural trades across many asset classes are starting to unwind and the currencies which benefitted most from the safe-haven trades over many years (CHF and AUD) are now looking the most vulnerable.
TECHNICALS: Trendline support on the weekly chart at 0.9870 (see chart) is likely to provide some initial support but I do not see this as a big level. It looks to me as if the market is intent on testing major support points between .92/.95 and selling rallies back towards prior lows at 1.0110 makes good sense. Hourly resistance levels now start near .9950.
CROSSES: The AUD has traded pretty much in a sideways direction against most of the other majors (ex-USD) with the exception of the CHF where it managed to make some gains. EUR/AUD made new swing highs above 1.3100, AUD/NZD is still consolidating in its well-trodden 1.2000/1.2150 range, and AUD/JPY is similarly range-bound between 100.50 and 102.00.
ORDERS & FLOWS: Local dealers report some decent buying interest in the AUD/USD near .9850 which should be difficult to breach. There is still talk of large AUD/JPY stops above 102.00.
INTRADAY CONCLUSION: Obviously the bears are still in complete control in AUD/USD but I wouldn’t be chasing it lower from current levels near .9900. I’d again look to play a 100-pip daily range, broadly between .9850 and .9950. Minor Australian economic data should not have any impact.
TRADE OF THE DAY: Buying dips in USD/CHF or selling big rallies in USD/JPY both look like potential winners to me. I’d play the above-mentioned range in AUD/USD and buying NZD/USD near .8160 (very strong technical support) with a tight stop is also a sensible risk-reward proposition.
