Currency Updates:
The USD has started the week on a weak note after Larry Summers withdrew from the race for the Fed chairmanship. AUD/USD has jumped back above .9300 in thin early-Asian markets and we are again eyeing important technical resistance at .9350. There is nothing of note on today’s economic calendar so we will look to flows and orders to drive volatility.
TECHNICALS: Resistance on the daily chart at .9350 has been confirmed and this level must be given a large amount of respect (see chart). A clean break and close above there would suggest that a basing formation could emerge. Initial intraday support levels should emerge near .9280, prior resistance levels.
CROSSES: The crosses have been fairly quiet over the last few sessions so perhaps it’s best to stay in consolidation-trading mode. AUD/JPY has very obvious technical parameters at 90.00/93.50 so trading near the edges of these ranges makes good sense. AUD/NZD turned lower last week after the poor Aussie jobs data and the slightly hawkish RBNZ, so I would tend to stay in rally-selling mode. GBP/AUD and EUR/AUD both continue to show signs of strength and it’s a matter of being patient and finding the best level to buy at.
ORDERS & FLOWS: Heavy stops were triggered this morning in thin illiquid markets on the break above .9280. Sell orders are expected near .9350 with stops above.
INTRADAY CONCLUSION: Once the stop-loss runs have died down, it still makes sense to sell the AUD on rallies against the EUR and GBP in particular. AUD/USD sentiment could change significantly if we get a strong close above .9350.
TRADE OF THE DAY: I remain overall quite bearish on the USD and I prefer to play this idea through the long GBP/USD trade. Buy dips in cable towards 1.5870 looking for a test of 1.6000 later today.
