Currency Updates:
The AUD had a strong bounce yesterday on the back of a number of factors; the lack of dovishness by the RBA, the budget impasse in the US causing a partial government shut-down, and strong support-on-dips from some big real-money funds. Chinese markets remain closed and that should ensure a quiet day although we do have Australian trade data on the economic calendar.
TECHNICALS: The obvious technical levels to watch are at .9280 and .9525 (see chart). The former was a 38.2% retracement level which held really well, usually a very bullish sign. Hourly resistance levels at .9400 were also breached overnight, suggesting more topside is likely. Recent highs at .9525 are the target here and buying dips is favoured.
CROSSES: AUD/NZD finally had a very strong bounce after lows near 1.1200 held yet again. Local banks reported a variety of names suddenly appearing to buy this pair yesterday suggesting that there is a lot of underlying demand near these levels. AUD/JPY is in consolidation mode but I definitely prefer the buy-dip strategy here, as long as technical support levels 90.00/50 remain intact. GBP/AUD couldn’t quite muster enough momentum to test recent highs at 1.7500 and looks like it’s started to retrace.
ORDERS & FLOWS: Continued buying-on-dips by real money funds unwinding long-term hedges has been the main flow factor in the market. There has also been heavy buying of AUD/NZD reported over the last 18 hours.
INTRADAY CONCLUSION: The AUD is starting to look bullish to me with interesting price action seen in AUD/USD, AUD/NZD and GBP/AUD. I prefer to buy any 50 pip intraday dips in AUD/USD looking for a test of levels closer to .9500 again.
TRADE OF THE DAY: I fancy that EUR/AUD may see lower levels over the next few sessions and I prefer to sell any small intraday rallies towards 1.4430/40 with tight-ish stops above 1.4470.
