Currency Updates:
The USD sprang back to life yesterday, rising sharply against the Yen during Asian trade and also against the Swiss Franc during overnight trade. Strong US economic data was the overnight catalyst whilst a rebounding Nikkei weakened the Yen during yesterday’s Asian session. Japanese retail trade and Australian construction data are the highlights on today’s economic calendar but once again most leads will come from the Nikkei.
TECHNICALS: The steep short-term downtrend was breached yesterday (see chart) which tells me that downward momentum is starting to weaken. That doesn’t mean we don’t still fall some more but any further losses are likely to be in a more sideways direction. Daily lows at .9580 from last year remain intact and with Sovereign bids reported towards .9550, this supports the sideways trading view. Look to .9750 for solid resistance on rallies.
CROSSES: AUD/JPY was the big mover yesterday, jumping from 97.00 to 99.00 before retracing (see chart). The short-term downtrend is still in control but we could easily see a re-test of 100.00 whilst the medium term bull trend is also still intact and the confirmation of strong daily support at 96.90 will have strengthened this trend.
EUR/AUD has drifted a little lower with heavily overbought technical indicators starting to unwind and AUD/NZD continues to look bearish, consolidating below its breakdown level at 1.1950.
ORDERS & FLOWS: Sovereign buyers expected in the AUD/USD between .9600 and .9550. AUD/NZD macro-type bids reported at 1.1750, offers also heavy 1.1975/1.2000.
INTRADAY CONCLUSION: I still think we will see some lengthy periods of consolidation and even if technical support at .9580 is breached, we should still see plenty of buying interest near .9550. I’d look for .9570/.9650 type range.
TRADE OF THE DAY: Patience is required in all of the majors and most of the volatility is likely to happen in USD/JPY where a 100 pip range roughly between 101.70/102.70 should cover most eventualities.
