Currency Updates:
The NZD has had a very volatile open this morning after Fonterra, their biggest exporter, reported contaminated milk powder which led to countries like China and Russia banning further imports. AUD/NZD has spiked higher on the back of this news. It will be a big week for the AUD with the RBA likely to cut rates by 25bps tomorrow. AUD short positioning is running at close to record level which suggests that a sustained bounce will happen as soon as some good news breaks.
TECHNICALS: The bears are still in overall control and there is no sign of any bottom formations on the short-term charts. Immediate support/resistance levels lie at .8870 and .8990 (see chart) and I’d expect prices to stay inside of these ranges today. Longer-term bulls should try building again on dips toward longer-term support levels around .8775. Trailing stops are likely to be building now above .9050.
CROSSES: AUD/NZD has been the big mover, jumping from 1.12 to 1.15 in a very short time. Previous lows near 1.1540 should now provide solid resistance (see chart). AUD/JPY is trading at mid-range levels near 88.00 and the range edges to watch here are at 87.25/89.00; selling rallies still preferred whilst prices are below 89.50
ORDERS & FLOWS: Market shorts in the AUD are being reported at close to record levels and there are certain to be heavy trailing stops at certain levels
INTRADAY CONCLUSION: The crosses overall still look quite heavy in the AUD but the relief rally in AUD/NZD might cause a similar reaction across other pairs in such a heavily oversold market. The bear trend however remains very strong and it’s difficult to see why they should panic with the RBA tomorrow likely to cut rates? I’d play as close as possible to the edges of ranges in AUD/USD, .8850/.9000 on the wide.
TRADE OF THE DAY: I think USD/JPY is likely to go lower with the market, both short-term and long-term players, sitting on long positions. The obvious place to have a stop-loss order is above 100.00, so sell intraday rallies to 99.30/50 with stops above there. The downside target is a test of 97.50.
