Currency Updates:
The AUD remains under extreme pressure and latest positioning data from the IMM futures market shows that the market flipped from being around 7,000 contracts long to being over 13,000 contracts short. USD strength continues to build and the USD index broke an important technical resistance point, showing that the move lower in AUD/USD is as much about USD strength as it is about AUD weakness.
There are no major data releases today so we can expect another fairly quiet session.
TECHNICALS: A quick look at the daily chart shows the power of this move (see chart) and the obvious technical target is daily lows just below .9600. The previous support lines near .9850/70 are the initial resistance points and I would suggest trading this 300 pip range for the week, with an obvious bearish bias.
Short-term charts are extremely oversold so we may get a minor relief rally in coming sessions.
CROSSES: EUR/AUD has failed to consolidate its break above important technical resistance near 1.3200 (see chart) and we could see a bout of profit taking emerge, so watch this pair closely.
AUD/NZD is trying to form a double-bottom near 1.1950 and AUD/JPY is still consolidating in a wedge pattern (see chart).
ORDERS & FLOWS: More Sovereign buying interest was reported on Friday on the approach to .9700 and if they are still live then we will have difficulty breaking lower today. Early interbank dealers are reporting trailing stops above .9775.
INTRADAY CONCLUSION: The AUD/USD remains in a strong downtrend but the AUD is starting to show modest signs of strength on the crosses. This suggests to me that we will see some range trading today, probably inside of a .9700/75 range.
TRADE OF THE DAY: Sell USD/JPY on any rallies towards 104.00 with stops tight above there. With China expected to protect the upper-end of a big double-no-touch exotic barrier and after comments from the Japanese EconMin that the Yen correction has moved enough, I think selling USD/JPY rallies makes good risk-reward sense.
Good luck out there.
