Currency Updates:
Emerging markets finally settled down last night but not before the Indian Rupee and the Turkish Lira made new lows against the USD. The AUD/USD managed also to stabilise around the .9000 mark, mainly due to heavy AUD/JPY buying by Japanese retail players. If the panic selling in EMs calms down, then we should see the AUD/USD start to recover some lost ground. If the taper-inspired flight out of EMs continues, then the AUD/USD will soon be testing .8850. Traders will be watching the newswires carefully for any comments from the Jackson Hole Symposium but with most of the big central bank leaders missing, it’s unlikely to be too controversial.
TECHNICALS: The fact that prices stalled near the 76.4% retracement of the .8850/.9240 rally will be giving the bulls some slight hope (see chart), but it’s only slight as the bears still look to have all the strong cards. The hourly chart is showing support near .8965/70 and resistance at .9035/40, so these are the main levels to watch today.
CROSSES: AUD/NZD is starting to look more interesting and we may be in for a stronger retracement towards 1.1770 (see chart). I’d prefer to wait until 1.1550 breaks before committing to a buy-dip strategy. AUD/JPY made a strong move higher yesterday but is still in consolidation mode between 86.25/90.00; I prefer the buy-dip play here but the trend is still bearish. GBP/AUD has broken back and closed below 1.7340, its break-up level, just to add some more confusion.
ORDERS & FLOWS: AUD/JPY buying by leveraged accounts was the main flow of note yesterday. AUD/NZD stops above 1.1550, getting heavier above 1.1600.
INTRADAY CONCLUSION: With EMs starting to calm down, hopefully, we should have a relatively quiet range-bound day. I’d play the .8970/.9030 range edges whilst trying to get a feel for the market. Positioning remains at extreme short levels so we may get some pre-weekend profit taking?
TRADE OF THE DAY: USD/JPY did as we expected yesterday, unfortunately though there was no dip. I still like the idea of being long this pair, especially if trendline resistance near 99.10 breaks.
