Currency Updates:
The big flight by speculative players into the USD continued almost unabated overnight although some pairs, USD/JPY in particular, have reversed quite sharply from interim highs. AUD/USD traded to lows near .9165 as risk-off sentiment and USD-bullishness hit the pair with a double-whammy.
Today’s economic calendar looks relatively bare, with a speech by the BOJ Governor providing the only high point. The market will continue to watch the short-term Chinese funding market which rose sharply yesterday as the PBOC continued to hold back on providing additional funds to the market. The main reason they do this is to try and slow down speculation in the property market in particular.
TECHNICALS: There is a very strong downtrend in control in the AUD/USD (see chart) but prices stalled on a number of occasions just above .9160 so we may get some minor retracements in this heavily oversold market. Resistance levels are fairly light until 1.0310/25.
CROSSES: AUD/NZD support at 1.1725/50 held yesterday and I’d expect this pair to find a new short-term range now roughly between 1.1750 and 1.2000. AUD/JPY oscillated around 90.00 in volatile trade and bearish momentum has definitely eased. EUR/AUD has closed above previously important resistance at 1.4350 and further gains certainly are feasible.
ORDERS & FLOWS: There was very heavy turnover yesterday in the AUD/USD with hedge funds selling billions and central banks taking much of this off their hands. The speculators have the upper-hand in the short-term but the central banks might be giving us the more medium-term direction.
INTRADAY CONCLUSION: Looks like we should have a range trading day between .9165 and .9250, with flows and positional adjustment prior to the weekend dominating trade.
TRADE OF THE DAY: Buy AUD/USD at .9170 with s/l at .9145 looking for .9220. Rinse and repeat.
Good luck out there and TGIF.
