AUD/USD
A tough day at the office, over the last 24 hours. The early action revolved
around the Slovakia “no” vote, closely followed up by the US Senate “China
currency” bill being passed, resulting in extreme volatility in USD/CNY and
general flow though selling of Asian Currencies. The Aud was no exception,
being sold down 100 pips to 0.9865 before a partial bounce to 0.9920. Once
Europe opened though, a major advance, reportedly on Chinese purchases and
some panic hedge fund short covering, - (once it was ascertained that Slovakia
is likely to reverse its decision as early as Friday), - has taken the Aud to a high
of 1.0205.
Today we get the domestic unemployment numbers so it would not surprise if
it were reasonably quiet early on. Expectations are of 5.3% and anything above
here would give ammunition to those looking for a rate cut which may see
possible easing in the AUD.
Equities retreated to close off their highs, having made the S+P target of 1220,
and the Aud upside is likely to be limited, with 1.0200 likely to provide a short
term cap. Immediate support is likely to be at 1.0100 and below here the first
Fib level is at 1.0070 and then 1.0015, which is unlikely to be seen today.
In the bigger picture the 61.8% Fibo resistance of 1.0765/0.9385 comes in at
1.0230 so this will be a tough hurdle to climb. Should we do so, 1.0310 and
1.0390 come into play. The downside now sees Fibo support at 1.0015 and
below here 1.0000 and 0.9890, which are unlikely to be seen for a while. For
now it pays to be flexible and I suspect some choppy trade may be ahead of us,
with direction dependent on what the next news headline brings. In the longer
term though the dailies are pointing to a stronger Aud in sessions to come.
Today, 1.0100/1.0200
EUR/USD
The session has been a tale of 2 very different halves, essentially revolving around
Slovakia’s vote on the EFSF. Yesterday’s negative vote saw a dip to 1.3580 in Asia
where it stayed offered until Europe opened when it began to rally strongly on
word that Slovakia will have a revote, likely to be on Friday and that it will be
passed. So Risk has been put back on in a big way as EU officials, including Merkel,
Trichet and Baroso, have spent the day busily talking up the future health of Europe
and all of a sudden things are apparently rosy again. Watch this space!
The Euro was not hurt at all by greatly improved data showing that EU Aug
industrial production improved +1.2% mom & +5.3% yoy, against expectations of
-0.7%, +2.2% Stocks are continuing their strong rally. The Dax finished up 2.21%
and the S+P has hit our initial 1220 target, with a high of 1220.25, closing up just
under1 % at 1207. (Futures 1215 high/closed 1198)
As to the EUR, it looks like some hedge funds and CTAs were pretty short as the EU
faced Armageddon and have been forced to do some major short covering, which
has helped drive the Euro, and other risk assets much higher during the session.
Technically the break above 1.3690 puts in place a medium term low, and we are
now pressuring Fibo resistance at 1.3843, 50% of the down-move from
1.4545/1.3140. With a high so far of 1.3832, we have more or less already done so.
The 4 hour indicators continue to be overbought and headway from here should
slow down, but a sustained break of 1.3840 could see a march towards 1.3940 (21
Sept high) and then 1.4000(61.8% Fibo). Unlikely at this stage.
Support today should be seen at 1.3750 and below here at 1.3690. The short term
oscillators are unwinding their O/B conditions, suggesting a drift lower in Asia,
without expecting too much directionally, ahead of the ECB monthly report and
German CPI later this evening, to be followed by Trade Balance and Jobless Claims.
More medium term support is now seen at 1.3570 and 1.3410, which should be in
no danger today. Good luck
