Currency Updates:
The main event today should be the month-end Fixings, particularly in London, where initial reports suggest that demand will be significant for the AUD. Asset managers re-balance their FX weightings at the end of the month and as this is also end of Australian financial year, we may get some heavier flows than normal.
Most of the action yesterday in the FX market happened elsewhere, with firstly NZD strength to the fore followed by GBP weakness after economic data missed estimates.
Once again the Australian economic calendar is empty with only a raft of Japanese data to potentially introduce volatility.
TECHNICALS: The bear trend remains relatively unchallenged despite the modest correction and prices are consolidating in a broad .9250/.9400 channel (see chart). I’d expect more of the same today but the bears look to have stronger cards in anticipation of a return of dominant recent down-trend. But pick your entry levels carefully.
CROSSES: I’m sticking to the view that AUD/NZD will form a top now below 1.2000 but the AUD is looking better against the other majors. GBP/AUD fell quite sharply yesterday and looks to be eyeing chart support at 1.6250 whilst AUD/JPY is gradually moving up and away from the important 90.00 level.
ORDERS & FLOWS: As mentioned above, solid demand is expected for the end-of-month fixing later on during the London afternoon session. Stops are also being reported on the downside, below .9245 and again below .9230.
INTRADAY CONCLUSION: More of the same I’d say, with the gradually rising short-term consolidation trend in AUD/USD, driven mainly by AUD demand on crosses like AUD/JPY and GBP/AUD. I’d play .9260/.9360 again with tightish downside stops in case the down-trend re-emerges.
TRADE OF THE DAY: I still like the look of the NZD/USD and playing the intraday long card would have worked nicely yesterday. Longs preferred near .7770 with stops below .7740 looking for .7850 intraday.
