Currency Updates:
Australian markets are closed today and with China also still closed, we can expect a quiet day. Friday was most notable for adjustments in the crosses with the heavily over-bought GBP market finally starting to retrace whilst the Yen and commodity currencies made some decent gains. The US budget impasse is likely to be resolved in coming days with the debt-ceiling needing to be raised by October 17th, otherwise they could start defaulting on some debt obligations.
TECHNICALS: The obvious technical levels to watch are still at .9280 and .9525 (see chart). The former was a 38.2% retracement level which held really well, usually a bullish sign but recent highs at .9525 will still offer stiff resistance. Short-term support levels start at .9380 and range trading is the most likely outcome for the next 24 hours.
CROSSES: EUR/AUD offered us a ‘no-brainer’ risk-reward entry level on Friday near recent chart highs (see chart) but is now back at mid-range levels and much more difficult to pick. GBP/AUD dropped even more sharply but will run into decent support levels near 1.6900. AUD/NZD support levels at 1.1200 continue to hold and I favour a test of topside resistance levels near 1.1650 in coming weeks. AUD/JPY is another in consolidation mode and I favour buying dips towards strong technical support 90.00/50.
ORDERS & FLOWS: Continued buying-on-dips by real money funds unwinding long-term hedges is still the main AUD flow factor in the market.
INTRADAY CONCLUSION: Not much will happen today with Australian markets closed and China still on holiday. The AUD crosses are looking more bullish and I think the buy-dip play in AUD/USD will be more profitable in coming sessions.
TRADE OF THE DAY: Cable has backed off from severely over-bought conditions and I’m looking to buy intraday dips. I’m not 100% sure on the exact levels just yet but wait and see if an hourly low forms 1.5950/70 and then dip your toes.
