AUD/USD
The AUDmade a new high on this run, at 1.0371 in early Europe, before
retreating sharply in line with everything else following comments coming from
the EU. The Aud is sitting right on trend line support and below here the first
Fibo level is at 1.0138. Equity markets are closing in the US down by about
1.93% and consequently the Aud, for the time being, feels somewhat heavy.
Today’s focus will turn towards the RBA minutes later in the morning and then
to the numbers coming out of China.
The indicators are still very mixed with the dailies continuing to point strongly
higher while the 4 hourlies are turning down from overbought levels. This all
suggests that we may be in for a couple of sessions of choppy directionless
trading within a wide 1.01/1.04 range. I wouldn't be getting too married to any
position one way or the other but prefer the buy dips/sell rallies scenario.
EUR/USD
Euro made a new high in the rally from the recent lows, reaching 1.3914 in
early Europe, before reversing sharply on comments from German Finance
Minister Schaeuble and then from Markel’s spokesman Siebert. Together, they
punctured the newfound market optimism by saying the inevitable, that the
upcoming EU summit on Oct 23 will not present a final solution for the debt
crisis and that the issue could last until 2012.
European Stock Markets closed sharply lower with the Dax down 1.8%. In the
US the trend has continued with the S&P closing down 1.93%. With the wind
firmly taken out of its sails, the Euro sank quickly to 1.3730 where it has broadly
settled ever since, sitting on the first level of support, just above Fridays lows.
Technically, today we would appear to be headed for a range trading session as
far as Asia is concerned. There is a lot of data out this evening and I would be
surprised to see too much before then. For the next few hours expect
1.3685/1.3785 to contain it, but further out the 4 hourlies appear to be pointing
increasingly lower while the dailies are struggling to maintain their upside
momentum. This all suggests that we are likely to see some choppy conditions
ahead but where overall, rallies are likely to be met with sellers, keen to hedge
their risk before the EU meeting this weekend. If 1.3685 does give way, it would
give added credence to the possibility that the rally is over.
In the medium term it looks increasingly as though we may have seen a
medium term top last night, but rallies could still squeeze up to 1.4000. The
downside is protected, for the time being at 1.3685 and below here at 1.3620
and 1.3560. Play it safe on a session by session basis for now, and watch out for
the data later on. Amongst others we shall see China-Retail Sales, GDP, IP.
Germany/EU ZEW Survey. US PPI. Bernanke will also be speaking later today.
