Currency Updates:
The AUD remained very steady overnight, trading 30 pips either side of .9800. Most of the action was in the cross currencies where the GBP, CHF and the CAD came in for some heavy selling mainly from the big hedge funds. The market should stay fairly quiet today as we await some major risk events in the BOJ rate decision (no major changes expected) and Mr Bernanke’s testimony later tonight. Locally we have Australian consumer confidence data for May which is unlikely to affect the AUD.
TECHNICALS: The heavily oversold short-term indicators have started to unwind and there seems to be plenty of potential for a bigger retracement towards .9920 (see chart). Support lines near .9750 are strengthening and I’d expect to see some volatility between these edges over the next 3 sessions. Daily trend is still very bearish so any big rallies are still to be seen as selling opportunities.
CROSSES: AUD/NZD remains stuck in neutral near 1.2000 but the longer it spends down here, the more likely we are to see the dominant downtrend reassert itself. AUD/JPY is also in range trading mode with parameters at 99.50/102.00. AUD/CAD should now be watched more carefully for signs of an interim basing formation. EUR/AUD still has been unable to regain the 1.3200 level and this looks like the pivotal level for further short-term directions.
ORDERS & FLOWS: Plenty of buying interest reported overnight near .9750 in the AUD/USD. The levels to watch on the topside start at .9850, where stops are reported, more sellers are seen .9870/80 but again there are trailing stops tight above there.
INTRADAY CONCLUSION: Range trading should continue to dominate but I expect an increase in volatility with the BOJ decision and Fed testimony ahead. Look to trade a wide .9750/.9925 range in the AUD/USD with a neutral bias.
TRADE OF THE DAY: Same as yesterday and I like the idea of waiting patiently for any spikes higher in USD/JPY towards 103.50 and use them as selling opportunities. For those intent on trading the AUD, the obvious risk-reward trade is to buy AUD/NZD near 1.1970 with a tight stop below 1.1950.
