Currency Updates:
The USD has been heavily sold across the board after the temporary resolution to the debt-ceiling impasse showed the market that another similar situation will arise early next year. AUD/USD broke above barrier protection at .9600 and seems likely to test technical resistance levels above 97 cents. Today sees a speech from RBA Governor Stevens as well as Chinese GDP on the economic calendar. Given the events of the last 24 hours, I think we can expect a lively session with downward pressure on the USD set to continue.
The obvious technical target is the 50% retracement level at .9710 (see chart). The longer term charts suggest that a test of 1.000/1.0120 is likely so buying dips is the clear bias. Support levels start at previous highs near .9525.
The AUD crosses were busy yesterday, with AUD/JPY falling heavily first on comments from the Chinese commerce minister that growth will struggle, but recovering sharply when the prospect of any US tapering seemed to recede. This pair is still being capped by strong technical resistance 94.45/65 (trend highs and 200-DMA). EUR/AUD still looks bearish but it’s already fallen quite sharply from interim highs and no point in chasing it lower in my view. AUD/NZD support levels near 1.1300 still holding.
Real-money funds have been the main sellers of USD across the board. Expect bids to be very solid now at .9550.
We may be seeing the re-launch of the USD bear trend and buying AUD/USD dips is the obvious play. We will continue to see plenty of volatility on the crosses, like we had yesterday in AUD/JPY, so picking the right entry level is still vital.
Sell USD against something is my advice and my preferred play is still to be long GBP/USD. It’s Friday, so no point in chasing the market, best wait for some good risk/reward levels. I’d also look to buy intraday dips in AUD/USD, and we might see levels back below .9600 if Stevens tries to talk it down.