Currency Updates:
The AUD saw some very heavy turnover yesterday, rallying initially to .9130 after the retail sales data where it ran into a barrage of selling. The inevitable sell-off then ensued and AUD/USD dipped to .9065 after the RBA mentioned the currency in its statement. Strong protection ahead of a barrier option at .9050 held firm despite a number of tests. Today should be another busy day with GDP data likely to have a short-term impact (but with no more RBA meeting until February, any impact will be short-lived).
There has been no overall change from yesterday with a strong technical support level at .9060, which is the 76.4% retracement of the rally from .8845 to .9750, still providing the base and looking stronger by the day. The short-term charts remain bearish but are in a consolidation phase which might even evolve into a reversal pattern (see chart).
AUD/NZD is slowly but surely headed towards 1.1000 where large optionality awaits. The NZD has also regained some important levels against currencies like the GBP. AUD/JPY needs to break above the 200-dma at 94.40 in order to generate fresh bullish momentum and despite yesterday’s reversal, I am still in the buy-dip camp. EUR/AUD continues to look toppy and I feel the bears may soon regain control.
Hedge funds have been consistently selling rallies but we may see a reversal of this if prices break above .9170. Option protection ahead of .9050 is the main story on the downside. Real money funds have been quiet in recent sessions.
More volatile range trading is the likely outcome roughly between .9100/.9160. GDP data should only have a short-term impact (unless it’s very wide of the expected mark) but I’m sticking to my short-term bullish bias.
The obvious trade for me is to buy dips in AUD/NZD towards 1.1020 with a tight stop directly below 1.0990. EUR/USD bears can try selling at 1.3625, again keeping stops tight above 1.3650. Medium-term players can consider building short EUR/AUD positions with stops well above 1.5050.
