Currency Updates:
The AUD has remained quite active on the crosses over the last 24 hours as we wait for a debt-deal announcement out of Washington. Yesterday’s RBA meeting minutes suggested that a rate cut might still be possible but there is no rush, and this caused the AUD to rally across the board. Heavy topside option barriers in the AUD/USD stalled the bullish momentum. Not much of note on today’s economic calendar so we sit and wait for the US.
The short-term outlook still looks quite constructive to me and the break above .9525 yesterday suggests that there is more topside to come (see chart). The obvious topside target is a 50% retracement level at .9715. Support levels are relatively weak until levels near .9425/35 so patience is required if you are a dip-buyer.
EUR/AUD was the big mover yesterday, taking out short-term support at 1.4270 and then breaking below recent lows at 1.4180 (see chart). The failure to close below will be slightly worrying for the bears but selling rallies looks like the play here for a move towards 1.3950. AUD/NZD remains very steady indeed but the failure of AUD/JPY to test 94.40 suggests to me that short-term bullish momentum is starting to wane.
Heavy buying of AUD against the EUR in particular was yesterday’s stand-out flow but the option barrier protection ahead of .9550 in AUD/USD was very heavy indeed. This barrier is still in place and there is an even bigger barrier at .9600. AUD/NZD bids are still being reported at 1.1280.
More choppy range trading can be expected as we await the debt-deal details out of Washington. If volatility picks up, we could see a wide range between .9450/.9550 but more likely we see a tight 40 pip range with moves dependent on flows in the crosses.
I fancy that the Yen crosses are getting a bit over-bought in the short term so I would look to sell any intraday rallies in AUD/JPY, keeping stops well above 94.50 is possible.
