Currency Updates:
Another failure to properly test .9000 psychological support led to some extended profit taking overnight, taking AUD/USD back close to .9150. Chinese CPI data due out around lunchtime could have some serious impact on the AUD, especially given that positioning is quite heavy amongst the speculative community. We are entering the traditional Northern hemisphere holiday period and positions are usually reduced during this time. USD sentiment remains bullish but with other pairs like EUR/USD and GBP/USD also close to important technical support, it’s little wonder to see some profit taking emerge from time to time.
TECHNICALS: The support and resistance lines are pretty clear at the moment, with recent lows at .9035/40 looking to form a double-bottom but solid resistance levels at .9180 and .9250 keeping the bears in control (see chart).
CROSSES: AUD/NZD failed to form the double-bottom we looked at yesterday, with the neckline at 1.1725 getting breached. This pair is best left alone now until the picture and major level become clearer. Macro funds continue to book profits in EUR/AUD and this has been easing the downward pressure on the AUD. The AUD/JPY cross has also continued to edge higher but will face stiff resistance at 92.50 (see chart).
ORDERS & FLOWS: The big bids ahead of .9000 deterred the bears from having another crack lower yesterday and trailing stops are reported to be very large now above .9275. AUD buying against the EUR has been the other factor of note in overnight trade.
INTRADAY CONCLUSION: I’d look to play the AUD/USD from the long side for the next few sessions. Buy intraday dips towards .9070/80 looking for a test of .9180 and possibly .9250. I don’t expect any big moves today unless the Chinese CPI is well outside of market expectations.
TRADE OF THE DAY: I’ll stick with the Aussie today. The market is quite short and very bearish, but will be worried about being short against weakening currencies like the Yen. If AUD/JPY breaks above 92.70 then start to look for intraday dips as buying opportunities for a move back towards 95.00.
