Currency Updates:
The AUD/USD has settled into a fairly tight consolidation range around 0.9200 as the market watches the developing credit crunch in China very carefully. This seems to be more of a managed slow-down by the PBOC rather than a structural problem and we should see some stability return this week.
There is nothing of note on the economic calendar today so we may be in for a fairly quiet session, dependent on flows for any volatility.
TECHNICALS: The strong down-trend still dominates the technical picture and we are currently in a consolidation phase between .9150/.9250 (see chart). A break higher out of this range will run into further solid resistance at prior lows .9325 and the bulls will need to re-take this latter level in order to try and force a base in place.
CROSSES: EUR/AUD is trying to form a short-term top near previous weekly highs around 1.4400 (see chart) and if this can form it will open the possibility of a retracement towards 1.3500. AUD/NZD has bounced off last week’s 1.1750 lows but will be toppy now near 1.2000. AUD/JPY is oscillating around 90.00 and trying to find its next directional move.
ORDERS & FLOWS: There are big orders either side of the AUD/USD which are ensuring the present range-trading mode; option barrier protection ahead of 0.9150 is expected to be very firm and hedge funds are selling just above 0.9250. Stop-loss buy orders are expected above .9260.
INTRADAY CONCLUSION: I could probably leave the same conclusion as on Friday, with range trading expected between .9150/.9250. I think .9325 is the important level to watch now in the more medium-term, because if the bulls reclaim and hold that, then I’ll be calling a base in place.
TRADE OF THE DAY: Play the range early in the day but be prepared to buy AUD/USD on a break of .9260 with trailing stop below .9220 looking for .9325 initially.
