Currency Updates:
The USD has enjoyed a modest rally after the Fed minutes suggested that tapering could start in the next few meetings. The language was not very convincing and I wouldn’t be basing any long-term trades off this event. Of much more relevance today will be the HSBC China manufacturing PMI and the BOJ rate decision. Any unexpected developments will lead to volatility in the AUD and JPY crosses.
Resistance levels held firm near .9455 and the focus is now on downside support levels at .9270 and at .9225 below there (see chart). Intraday resistance levels are reasonably light until .9400. I’m still of the view that the medium-term direction is up.
EUR/AUD reversed lower after the ECB mentioned ‘negative’ rates. It is still very much in rage-trading consolidation mode but selling rallies towards 1.45 is certainly the preferred strategy. AUD/NZD support at 1.1190 has held yet again and risk-reward would definitely seem to favour the buy-dip strategy. AUD/JPY took out short-term resistance at 94.10 but is now back below there and further sideways consolidation is favoured until something happens to take out major resistance at 95.50.
Plenty of stop-loss sell orders are being reported below .9270. Prime broker reports suggest that the professional trading market is short of AUD/USD but probably comfortably so at present.
Patience required and swing trading is the order of the day in my opinion. The big levels are at .9225/.9455 and I’m looking to build a long position inside this range. The HSBC number could send the AUD/USD 50 pips either way but I think we need to be willing to counter-trade these moves.
NZD/JPY worked out nicely yesterday and I think we should continue to trade the edges of the 81.25/84.25 consolidation range there. Be patient in all pairs, there will be opportunities post HSBC and BOJ but there is no point in guessing what will happen at either event. Buy big dips in AUD/USD is my other suggestion.
