Currency Updates:
The AUD has slipped lower against all of the other major currencies after poor Chinese PMI
data yesterday showed that their manufacturing has stopped growing again. This is of course
seen as bad for Australian commodity exports. Precious metals gave up some of their recent
gains as well and this also added to downside pressure on the AUD. Yesterday’s Australian
CPI data has dampened speculation on an August rate cut to some degree, with futures
markets now pricing in roughly a 50% chance.
TECHNICALS: Short-term support near .9140 held the first test overnight and a clean break
below there could open the way for a test of .9040 (see chart). The really big levels to watch
are at .9000/.9350 and as we are opening right in the middle of this range it’s difficult to have
a very strong short-term bias. Longer-term I’m still in the buy-dip camp for a move back
towards .9600.
CROSSES: The crosses are sitting close to interesting levels again. AUD/NZD is sitting just
above reported support at 1.1500 and a clean break below there targets 1.1200. If support can
hold, then further 1.15/1.18 range trading is on the cards. EUR/AUD is once again trading at
1.44 and there was some very heavy buying in this cross during early London trade.
ORDERS & FLOWS: There have been heavy bids reported in the AUD/NZD near 1.1500
in recent days (though they might cancel ahead of the RBNZ?) Real money buyers were
noted in the AUD/USD near .9150 in overnight trade.
INTRADAY CONCLUSION: It should be another big day for the AUD with so many big
levels looming in the crosses. I’m still of the view that we are in an uncertain consolidation
period which usually means range trading. Sentiment remains bearish, but so is positioning,
so I think we will see the AUD support levels hold (but keep stops tight in face of strong bear
trend).
TRADE OF THE DAY: The RBNZ decision will add some volatility to the NZD so
perhaps wait until after that, but if 1.1500 support is still holding in the AUD/NZD then try
buying with a tight-ish stop looking for a move back towards 1.1700.
