Currency Updates:
The FX market has opened the new week pretty close to last week’s levels but there have been some events over the weekend which could have longer term implications. The Federal Reserve is reviewing its decision from 2003 to allow banks to trade in physical commodities, and this could have an impact on commodity and equity markets. The Japanese government won a majority in the weekend elections, making it easier for them to push through their economic policies and this should be Yen negative over time.
Closer to home, two separate weekend press reports suggest that the Treasury will revise down economic forecasts and the RBA will cut rates in August.
TECHNICALS: The main technical feature for me is still the heavily oversold nature of the daily charts and I expect this to start unwinding sooner rather than later (see chart). In the meantime, the short-term parameters are very clear at .9000/.9350 so play the edges of this range.
CROSSES: AUD/JPY is still looking moderately constructive, consolidating above important technical support at 89.50. Short-term resistance lies at 93.00 and we may get a test of that today after the Japanese election results? AUD/NZD looks to be in a 1.15/1.18 holding pattern with a bearish bias still. EUR/AUD has been pretty volatile in recent times and buying big dips looks like the safer play.
ORDERS & FLOWS: Pretty quiet on the order front, as usual on a Monday morning, with nothing to report thus far.
INTRADAY CONCLUSION: Buying big dips towards .9075 is how I plan to play it. Despite the AUD-negative press reports over the weekend, the AUD is holding up reasonably well so I prefer to stay in dip-buying mode. The down-trend is still reasonably strong so bulls need to pick their levels carefully.
TRADE OF THE DAY: The most obvious risk-reward play is to buy dips in AUD/NZD towards 1.1525/35 with a stop below 1.1500 looking for a test of levels above 1.1700.v
