Currency Updates:
The Australian unemployment data is due out later this morning and will be today’s key risk event. Any movement is likely to be short-lived as I cannot see the data impacting much on monetary policy at a time when so many other events are happening. The confirmation of Janet Yellen as next Fed Chairperson gave the USD a boost across the board but the AUD/USD didn’t fall much as risk-trades also rose.
TECHNICALS: The short-term charts look moderately constructive (see chart) and I favour the buy-dip approach. Initial support is at a 38.2% retracement of the 5-wave up-move which comes in near .9405. There is much stronger support .9335/50 and that is the preferred entry level so patience required.
CROSSES: GBP/AUD fell heavily again, breaking below previous lows near 1.6870 but failing to test more support directly below there (see chart). This looks to be one pair in which there were big positions established and they are being unwound. AUD/NZD still looks solidly bullish but the slow pace of the rally is surely a worry to the bulls. AUD/JPY is stuck in sideways consolidation but the overall picture still favours the dip-buyers in my view, notwithstanding the October 17 deadline hanging over the US debt markets.
ORDERS & FLOWS: No big orders are being reported close to the market in AUD/USD, with bids being patient and sitting below .9350 and offers still solid above .9500. Local banks say that selling interest is presently dominant but neither side seems in any hurry.
INTRADAY CONCLUSION: It’s hard to trade a pair which isn’t moving. The AUD has made some strong gains against the GBP in particular and personally I feel that it will make up some ground against the other majors as well. Buy big dips in AUD/USD.
TRADE OF THE DAY: The only good risk-reward trade jumping out at me today is EUR/JPY. Reliable sources are quite bearish on this pair and feel that 132.20 will cap whilst stops below 131.00 will get tripped soon. It’s currently trading near 131.60 and I will look to sell any 30/40 pip intraday rallies with fairly tight stops.
