Currency Updates:
The market is finally starting to evolve as I had expected and I think we are likely to see a much higher AUD in coming weeks. Yesterday we had some disappointing local jobs data and some decent Chinese trade data, and it was the latter which the market reacted to. The AUD market is very short, and it got short at the wrong levels, so any sign of good news is likely to set off more trailing stops in thin holiday markets. Today we have the RBA monetary policy statement and Chinese CPI on the calendar.
TECHNICALS: Much of technical analysis is subjective and I’m seeing AUD/USD with bullish-tinted glasses. A basing formation on the shorter-term charts suggests to me that we could move straight back to .9300 (see chart). Yesterday’s break-up level near .9030/50 should provide support on the day. There is some trend-line resistance coming in near .9150 but I think .9300 is the target on this up-move.
CROSSES: Lots of interest in the crosses with bottoming patterns emerging for the AUD. EUR/AUD is trying to form a Head and Shoulders reversal formation (see chart) and the big level to watch now is near 1.4750. AUD/JPY is also interesting; an attempt to form a double-bottom at 87.20 failed but Fibo support at 86.25 was untested. There is now massive resistance at 89.00/30. Play the edges of this range. AUD/NZD has recovered some recent losses but is still in a 1.12/1.15 holding pattern.
ORDERS & FLOWS: Solid bids reported from a number of directions at .9030/40. I am still hearing reports of large trailing stops top-side, but no exact levels at moment.
INTRADAY CONCLUSION: I expect to see AUD/USD higher again before the weekend but we could see a morning dip, so keep stops well below .9030. Bears need to be patient in my view, but may get another chance to sell close to .9300 if more trailing stops go off; so be patient.
TRADE OF THE DAY: Once again, no surprise, long AUD is my trade of the day. I still prefer to play this idea against the USD, so buy any intraday dips towards .9050 with stops below .9020. If you prefer to play against the EUR, then sell EUR/AUD near 1.4730 with a stop above 1.4775.
