Currency Updates:
The AUD has started to unwind some of its over-sold technical and positional tendencies. There have been some decent gains made against all of the other majors but with resistance levels looming against the USD. JPY and EUR, the easy short-term money has probably been already made. Overall I like the idea of being long AUD/USD but we could easily see a re-test of levels near .9000 before more topside develops. Not much on today’s economic calendar so it will again be all about positioning.
TECHNICALS: An intraday break-down level .9210 is capping for now and whilst below there, we have the possibility of a deeper retracement back towards .9030 (see chart). Even if this resistance level breaks, there are likely to be more stiff levels near .9300. Overall the heavily oversold dailies look to be reversing so I definitely favour the buy-dip approach.
CROSSES: Lots of interest in the crosses with bottoming patterns emerging for the AUD. EUR/AUD has formed a Head and Shoulders reversal formation (see chart) and the next support level is to be found near 1.4350. AUD/JPY has also bounced after just failing to test major Fibo support at 86.25 but will run into strong technical resistance at prior lows near 89.00/30 (see chart). AUD/NZD has found an interim base at 1.1200 and next resistance levels around 1.1550.
ORDERS & FLOWS: Market short positioning as of last Tuesday was at a 3-year record high according to latest CMM reports.
INTRADAY CONCLUSION: The great unwind of AUD-shorts has begun but we still need to pick our entry levels carefully. The Aussie is soon to run into resistance against the JPY at 89.00, against the NZD above 1.1500 and against the EUR near 1.4350, so I think it’s best to sit back and wait for dip-buying opportunities especially against the USD. Book profits on longs near .9210 and re-buy any deep dips towards .9050.
TRADE OF THE DAY: If the AUD/USD stalls near .9200 and the AUD/NZD remains short-term in recovery mode, then we should see the NZD/USD drift lower. There seems to be excellent risk-reward in selling NZD/USD near .8050 with a stop above .8075 looking for levels back near .7950.
