Currency Updates:
The consolidation phase for the AUD lasted all of 4 sessions and the failure to break back above .9200 led to another strong sell-off in AUD/USD. The impulsive nature of these moves lower suggests that there is more downside to come for the AUD and the fact that the selling is coming against all of the other majors should be telling the AUD bulls to take a long break. There is nothing much on this morning’s economic calendar apart from the NZ trade data.
The almost vertical fall on the short-term charts has re-commenced and the inability to break back above relatively minor resistance levels (and then fall heavily) shows just how strong the downtrend is. Next support levels come in near .9060 (see chart) which is the 76.4% retracement of the rally from .8845.
AUD/JPY was the latest cross to jump on the bear’s bandwagon overnight, finally falling out of its short-term sideways range. The short-term trend is bearish and the next big support level is below 91.00 (see chart). AUD/NZD will again close below its previously stubborn lows at 1.1190 and risk-reward surely favours the bears near current levels. There is large optionality reported at 1.1000 and this should prove magnetic in coming days. The breather in GBP/AUD also didn’t last long and it made new highs near 1.7800.
Real money funds are still the heaviest sellers of the AUD as indeed have some of the big option players, forced to adjust their hedges by the impulsive weakness. Asian sovereign buyers were reported below .9100 in overnight trade.
There is no reason to try and pick a bottom in this AUD move, especially on the crosses. AUD/USD is getting oversold so we may see some .9050/.9200 consolidation over the next few sessions especially if other major pairings like GBP/USD make big bullish breaks.
I don’t like trading the EUR/USD very much as there are too many conflicting forces at play but it doesn’t seem to want to fall at all. I’d play it from the long side intraday looking for a move towards 1.3650 later tonight.
