Currency Updates:
The AUD has opened lower in Asia after much poorer than expected China trade data which was released over the weekend. The market had expected a 6.0% YoY increase but got a fall of 0.3% YoY instead. The AUD/USD has ‘only’ fallen by 50 pips on the back of this which suggests that the market is not long and there are not very many stops on the downside. The talks in Washington regarding a solution to their debt-ceiling impasse keep dragging on and this will also weigh on risk trades and of course on the USD. Chinese CPI data is the highlight of today’s economic calendar.
Another failure last Friday above .9480 will be giving the bears some hope (see chart) but support is equally solid near .9380. With some indecision in the market it will make sense for the AUD/USD to trade sideways and these look like the obvious range parameters. Bigger picture levels are found at .9285/.9525.
The Chinese data and the risk-aversion associated with the US debt-talks have caused the AUD to lose some of last week’s bullish momentum on the crosses. AUD/JPY fell by almost 100 pips off Friday’s highs and AUD/NZD has surprisingly lost momentum after a few very strong up days. GBP/AUD should also be watched closely after technical support levels near 1.6860 basically held firm.
There is a large-ish option barrier at .9500 in the AUD/USD which will be vigorously defended and there are stops directly above that level. Those selling to defend the barrier are re-loading on 50/70 pip dips.
I’m still in the range trading camp. I remain bearish on the USD but the AUD may struggle on the crosses whilst risk aversion is heightened. Play the .9380/.9480 range but I’m sticking with my bullish bias.
The markets are pretty choppy at the moment and hard to get a solid feel for the really important levels so it’s best to be very patient. Normally, poor Chinese data and risk-aversion re US talks implies a lower USD/JPY.
