Daily Outlook

The Australian Dollar traded in a tight range 0.7194-0.7259 as global markets are in gridlock with no catalyst to provide direction. The main mover was in AUD/JPY falling 1% to below 79 as JPY strengthen. Soft Japanese data and G7 meeting commentaries undermined risk appetite, driving flows into Japanese Yen. Weakness in Iron ore continues overnight, dropping to 10-week low. Remarkable volatility in Iron ore as it collapsed from $70.46 high on 21^st April to $51, a reflection of how sensitive the market is to sentiment of China’s recovery. The moves are also exaggerated by the speculative inflows into Chinese commodities futures and the lack of liquidity in Iron ore market. RBA’s Stevens is due to speak today at a briefing but unlikely to comment on monetary policy given the sensitivity around it at the moment.

Global equities are in gridlock, trading in a narrow range. With uncertainty brewing over US Fed’s next move, investors and traders are sitting on the sideline. Risk events that could be catalysts for new direction include fresh disruption in Oil market, refocus to China’s issues (Yuan, non-performing loans, excess capacity) and Yellen’s hawkish turn.

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Trade AUD/USD Intraday: under pressure. Pivot: 0.7255 Our preference: short positions below 0.7255 with targets @ 0.7185 & 0.7160 in extension. Alternative scenario: above 0.7255 look for further upside with 0.7275 & 0.7300 as targets. Comment: as long as 0.7255 is resistance, look for choppy price action with a bearish bias. Supports and resistances: 0.7300 0.7275 0.7255 0.7223 Last 0.7185 0.7160 0.7135

Trade AUD/JPY Intraday: turning down. Pivot: 79.42 Our preference: short positions below 79.42 with targets @ 78.62 & 78.38 in extension. Alternative scenario: above 79.42 look for further upside with 79.76 & 79.96 as targets. Comment: the RSI shows downside momentum. Supports and resistances: 79.96 79.76 79.42 78.82 Last 78.62 78.38 78.15

Trade SPI 200‏ (ASX)‏ (M6) Intraday: bullish bias above 5310. Pivot: 5310 Our preference: long positions above 5310 with targets @ 5375 & 5410 in extension. Alternative scenario: below 5310 look for further downside with 5270 & 5240 as targets. Comment: a support base at 5310 has formed and has allowed for a temporary stabilisation. Supports and resistances: 5450 5410 5375 5338 Last 5310 5270 5240