Currency Updates:
The AUD/USD has continued to drift lower, making new swing lows overnight near .9940 after better-than-expected US retail sales data. The technical outlook remains bearish and any nasty surprises in tonight’s budget could send the pair into another tailspin.
TECHNICALS: It’s probably a good time to take a look at the longer-term charts and see how much downside this move might have (see chart). The overall target in my biased view remains a 61.8% retracement level around .9200 but the first target is the 200-week MA near .9870 and this should attract some profit takers. Short-term resistance looks to be building near .9980 and selling intraday rallies is still favoured given the strength of the down-trend on the daily charts.
CROSSES: EUR/AUD has opened today above 1.3000 and looks set to test the interim target at 1.3200 (see charts). I will reduce my long position significantly as we approach that level. AUD/JPY is consolidating in a wedge formation (see chart) and a break outside of this will generate significant momentum. AUD/NZD is also in consolidation mode between 1.2000/1.2150.
ORDERS & FLOWS: Not a lot of heavy turnover yesterday with the big players sitting on the sidelines. The big prime brokers report an increase in speculative short positioning although overall positions are still relatively small. There are reports of some pending buy-flows in AUD/JPY which might impact around the time of today’s Tokyo fix.
INTRADAY CONCLUSION: I’d look to play a broad 100 pip range ahead of tonight’s budget, probably between .9875/.9975. Sentiment is still bearish but we’ve come quite a long way already in recent days so there will be profit-taking interest on dips.
TRADE OF THE DAY: Once again I think we will need to be patient today; USD/JPY looks very well bid but with big barriers in place at 104.00, I am looking for selling opportunities an any intraday spikes.
