Currency Updates:
The events in Cyprus are still driving volatility in the market and risk sentiment is of course being affected. There were big flows out of EUR/AUD as investors sell first and think later. The AUD/USD is more or less unchanged compared with yesterday but it’s starting to look a bit tired on short-term charts and if global risk aversion escalates, we can expect it to edge lower inside the well-established range.
RBA Governor Stevens will be speaking this afternoon at 15:45 in Sydney and this may give rise to some tradeable headlines.
CROSSES: EUR/AUD stalled near 1.2500 (see chart) and fell very heavily from there. The obvious technical target is 1.2160 and I’d much prefer to be short this pair although being long AUD in a risk-averse environment is not without its risks. AUD/JPY (see chart) continues to trade inside of its recent channel between 97.20/100.00 but a clean break below could well set off some very sharp stop-loss selling.
ORDERS & FLOWS: There was heavy EUR/AUD selling overnight with two separate reports of around 1 billion AUD equivalent by big European banks on behalf of their customers. Heavy offers were also seen in AUD/USD at 1.0475/80 and it looks like the big hedge funds are still looking to sell at this level, like they did a few weeks ago. These flows (one AUD positive, the other negative) look to have netted each other out.
INTRADAY CONCLUSION: Prices have stalled near previous highs at 1.0480 and this leaves me more inclined to be short near current levels at 1.0460. Keep intraday short-stops tight above yesterday’s highs and be happy with 70/80 pip profits as support will be solid at 1.0350/70. Bulls should be patient and wait for intraday dips. Much will depend on what happens in the crosses so keep a sharp eye on the big levels there.
TRADE OF THE DAY: Yesterday’s idea was almost perfect, picking up the 130 pip fall in USD/JPY, and I still think there are more Yen gains ahead. With the AUD/USD starting to look a bit overbought, today might be the day to position ourselves for a bearish break in AUD/JPY. Sell intraday rallies to 98.90 with stop above 99.50 looking for 96.00.
Good luck out there.
