Currency Updates:
I totally misjudged the strength of the AUD sell-off on the crosses and technical support levels in AUD/USD were unable to hold. There is no point in getting in the way of this sort of momentum and the AUD looks set for further losses, especially against the GBP. The economic calendar is pretty bare until RBA deputy governor Lowe speaks later today. Verbal intervention has been very effective for the RBA in recent weeks so we can expect more of the same today.
Short-term momentum remains very bearish and any rallies back towards previous support and Friday’s highs at .9225/50 should be considered a selling opportunity. The move from .8845 to .9755 developed as a 5-wave up-trend and that should be respected, meaning that the 76.4% Fibo at .9060 is still relevant (see chart).
All of the action has been on the crosses. GBP/AUD has made fresh trend highs and is in a strong bull trend. Chasing it higher is certainly dangerous but playing this cross from the long side is the obvious directional trade. EUR/AUD has made progress as well but still needs to get above 1.50 in order to increase bullish momentum. AUD/NZD broke below 1.1190 on Friday night but the failure to close below does indicate that the bears don’t have it all their own way (best sit this one out for a while until the signals are clearer).
Real money funds have been notable sellers of the AUD as indeed have some of the big option players, forced to adjust their hedges by the impulsive weakness.
The focus should remain on the crosses and we can expect further AUD weakness. I’d be careful about getting overly bearish AUD/USD at these levels as it’s already fallen a long way. Play a .9060/.9240 range for the beginning of the week and be patient as we are currently in the middle of this range.
At least my cable long trade worked out on Friday and I expect more of the same. Buy any small intraday dips and play from the long side for a break above 1.6260 and a move towards 1.6410.
