Currency Updates:
The AUD is in for a busy week with the RBA meeting tomorrow and the non-farm payrolls data on Friday. The speculative market is sitting short of AUD, based on what I’m hearing from the big Prime Brokers, and if real-money funds start to reduce their selling of the AUD we could be in for a retracement. Unofficial inflation data, minor building data locally, and of course the HSBC China manufacturing PMI are all due for release today and that should ensure a busy session.
Technical support level at .9060, which is the 76.4% retracement of the rally from .8845 to .9750, has basically provided support despite a marginal break on Friday. This level is growing in importance now. The short-term charts are also flattening out as bearish momentum wanes (see chart). The big technical levels are now clear at .9050/.9250.
The AUD has also stabilised on the crosses over the last few trading sessions and it’s beginning to show some small signs of strength against the NZD and the JPY at least. AUD/JPY has continued to make modest gains but is still stuck in range-trading mode either side of 93.00. AUD/NZD is back at its breakdown level and recent pivot near 1.1200 and if the bulls can hold above here, we could get a sharp short-covering spike?
Most orders get cancelled on a Friday so we must wait and see what returns. There was talk on Friday of good-sized interest to sell EUR/AUD above 1.5000.
I’m again tending towards playing AUD/USD from the long side intraday but I’m not overly confident, given the spate of risk events over the next few days. We are opening near .9125 so I favour being patient and looking to buy dips towards .9080 with stops below .9040 looking for a rally over the next 24 hours towards .9230.
As usual I’m looking for contrarian plays and I like the risk-reward being offered by EUR/AUD. The single currency is showing signs of weakness against the GBP and is stalling at technical resistance against the USD. With the AUD looking oversold, selling EUR/AUD rallies with stops cleanly above 1.5050 makes sense.
