Currency Updates:
The AUD was sold heavily again on Friday as big month-end flows from asset managers proved to be mainly in one direction. Major support levels remain intact however, and we have seen a modest bounce this morning back above .9600 after better than expected Chinese manufacturing data was released over the weekend.
There are some risk events on the economic calendar with the HSBC version of China PMI as well as Australian retail sales.
TECHNICALS: The short-term downtrend is still dominant but it has entered a consolidation phase and the big levels to watch now are at .9525 and .9700 (see chart). The downtrend has started to level off but must still be respected and it comes in now just above .9650.
CROSSES: AUD/NZD made a sharp break higher on Friday and if a retracement is now underway, the obvious technical target is at 1.2145 (see chart). The previous pivot near 1.1950 should provide support again.
AUD/JPY looks to be in full retracement mode and its first target is at 95.50 (see chart). The breakdown level at 96.90 will provide initial resistance.
The vertical trend in EUR/AUD continues unabated but be wary as technical indicators are getting very overbought.
ORDERS & FLOWS: Not much to report this morning, as usual on a Monday. US investment houses were large sellers of AUD/USD above .9650 on Friday morning and they are still expected to be selling near there.
INTRADAY CONCLUSION: Range trading today; AUD/JPY has important technical points reasonably close to the opening levels and any interest to sell AUD/USD rallies is likely to be counter-balanced by flows in pairs like AUD/NZD, where short-covering has set in. I’m tipping another 100 pip day, .9560/.9660 in AUD/USD.
TRADE OF THE DAY: There is a nice technical set-up in the GBP/USD and I think being long is the better play here with a stop below 1.5130
