Currency Updates:
The budget impasse in the US looks increasingly likely to lead to at least a partial US government shutdown and this in turn has led to risk-aversion in the FX markets. The main movers have been USD/JPY and USD/CHF, with both pairs breaking lower. The EUR has also slipped this morning, with more political in Italy the cause. The AUD is definitely side-lined and we can expect more range trading whilst the opposing forces are at play. The HSBC version of China manufacturing PMI is the main event on the economic calendar.
TECHNICALS: The main technical level to watch is a 38.2% retracement at .9280 (see chart). A clean break below there brings previous highs and a 50% retracement near .9210 into focus. Overall, buying big dips is still preferred.
CROSSES: EUR/AUD has broken back above the neckline at 1.4460 and this formation is no longer relevant. Range trading is preferred here but we need some patience before settling on what the important short-term levels are. GBP/AUD has accelerated higher and the next target is trend highs at 1.7480. AUD/NZD is again testing the 1.1200 support levels and with momentum waning, buying exhaustive dips makes sense to me. AUD/JPY support should be very firm near 90.00 (see chart).
ORDERS & FLOWS: Real-money funds have been main buyers, unwinding longer-term hedges, whilst most of the AUD selling seems to have been on the crosses particularly against the JPY and the GBP.
INTRADAY CONCLUSION: Stay in range-trading mode in the AUD/USD; look for technical support at .9280 to attract buyers whilst risk-aversion will ensure that the AUD stays heavy on the crosses in the short-term, so rallies to .9350 will attract sellers.
TRADE OF THE DAY: Not really seeing any value trades this morning and I don’t like picking definite levels when volatility is heightened. Range trading the AUD/USD between .9270/80 and .9345/55 makes the most sense to me.
Good luck out there.
