Currency Updates:
There were more woes for the beleaguered AUD overnight and it suffered more heavy losses especially against the GBP. We are seeing some very big real-money funds continue to adjust their weightings and further moves in the crosses will only lead to more selling. Option players have also been to the fore and this is the way trends develop in the FX market, when selling begets more selling. It’s Thanksgiving today in the US, traditionally a quiet day on all global markets. Japanese retail trade is the only economic data of note.
The next technical support level is at .9060 (see chart) which is the 76.4% retracement of the rally from .8845. If that level breaks then it opens the way for a full retracement to .8845 and possibly to more long-term technical support near .8650. Initial resistance levels start at .9135 but are much stronger near .9200.
GBP/AUD got very close to 1.80 last night and further gains look likely, with previous weekly highs at 1.8500 the obvious target. AUD/NZD is still consolidating below previous lows and a test of large optionality at 1.10 seems inevitable. AUD/JPY is the only one of the major cross pairs where the AUD isn’t getting thrashed but it’s in sideways trading mode still around 93.00.
Real money funds are still the heaviest sellers of the AUD as indeed are some of the big option players, forced to adjust their hedges by the impulsive weakness. On a brighter note for the AUD, one of the major bank’s end-of-month flow analyses suggests that we might see some solid AUD/USD demand in coming days.
There is still no reason to try and pick a bottom in this AUD move, especially on the crosses. Nevertheless, if Fibo support at .9060 continues to hold stubbornly, then you can try buying with a tight stop below .9045. Resistance levels are light until .9200 so bears will need to show plenty of patience.
I’d continue to play EUR/USD and GBP/USD from the long side, and if you want a bit of extra volatility then look to buy EUR/JPY or GBP/JPY.
