Currency Updates:
The AUD recovered modestly yesterday after Chinese GDP data came in right on expectations. Today sees the release of the latest RBA meeting minutes and they might give the market something to trade against but overall it’s looking like it will be another quiet range-bound day.
TECHNICALS: Sometimes it pays to sit back and have a look at the bigger picture and there is still no doubt in my mind that the AUD/USD is extremely oversold and at some stage will retrace towards more neutral levels (see chart). In the FX market, timing is the most important factor, and as yet there is no sign of any short-term bottom forming from which to launch this retracement.
CROSSES: AUD/JPY was the big mover yesterday (see chart) and support lines near 89.50 have again proven to be very solid indeed. EUR/AUD has closed back below the former resistance levels at 1.4375/1.4400 and while it still looks bullish, we could easily get another pull-back towards 1.3900 without endangering the up-trend. AUD/NZD should continue to consolidate in a tightish range around 1.1650.
ORDERS & FLOWS: Dealers say that order boards are light between .9000 and .9200 which means we could get plenty of whippy side-ways trading inside of this range.
INTRADAY CONCLUSION: I’m still of the view that the most immediate risk to the AUD/USD is to the topside if/when we get a short-covering rally. Play the edges of the .90/.92 trading range and I prefer the bullish bias.
TRADE OF THE DAY: I think the best way of trading this present market is to look for logical technical trades with good risk-reward returns. I like the look of technical support in EUR/CHF at 1.2345, so buy near there with a tight-ish stop. I also like the look of the H&S formation on the EUR/JPY daily chart so sell near 131.00 with a stop above 131.40.
