Currency Updates:
It was a mixed bag for the AUD/USD overnight, making strong gains initially against the USD during Asian trade but giving much of the gains back when solid technical resistance at .9700 held firm. There was also plenty of volatility on the crosses and the overall bearish short-term trend remains intact. The USD seems to be entering a short-term bearish phase so we may see the AUD hold up against the greenback but I’m not so sure about the other majors.
The catalyst for the weaker USD was weaker than expected jobs and GDP data from the US. Today’s calendar shows a raft of data out of Japan, which is usually ignored, and only minor private sector data from Australia.
TECHNICALS: The downtrend continues to flatten out (see chart) and a possible basing pattern suggests that bears should consider booking some profits after a good run. The obvious levels to watch are .9580/.9700 and a break either side will add to momentum.
CROSSES: EUR/AUD has again made fresh trend highs and my target at 1.3800 is coming clearly into view (see chart). This pair still seems to have potential for sharp gains given structural positioning in the market.
AUD/JPY chart support at 96.90 has held yet again and we can expect that there are a large amount of stop-loss sell orders now placed below there.
AUD/NZD has moved back towards its breakdown level at 1.1950 and I still favour selling rallies in line with the dominant downtrend.
ORDERS & FLOWS: Heavy end-of-month turnover is expected today and most reports suggest that it will be mainly AUD-negative. The market is short in anticipation of these flows and if they don’t eventuate, watch out for some sharp short-covering rallies.
INTRADAY CONCLUSION: I’m expecting a busy day so keep your powder dry and wait for silly moves either way; buy any large dips back towards .9580 or sell near .9700 with a very tight stop and then try selling again near .9775. There should be some large flows during the course of the day but we don’t know which flows come first.
TRADE OF THE DAY: There are no specific levels jumping out at me this morning, but I would suggest that we will see plenty of volatility and two-way price action. Overall preference is to be short the USD in the short-term and the EUR looks like it wants to go higher across the board so buy EUR/USD dips.
