EUR/USD
It was all about the BOJ and Dollar/JPY on Monday and the flow-on effect that
impacted on all asset classes and the week’s outlook. Risk was definitely off at the
start of the week, with the commodity bloc, stocks, oil, gold and US treasury yields
all lower by the end of trade, although most has recovered from their intraday lows,
as the impact of the Jpy intervention faded late in the session.
In Europe, the Euro retreated from its open at around 1.4170, driven lower by the
action in the Jpy, to a low of 1.3905 in very choppy conditions as worries mount as
to the effectiveness of last week’s EU rescue package. Italian bond yields remain
above 6% and the European equity markets were down 3%-3.5% on the day.
Adding to the pressure in the Euro today was the move in Eur/Gbp which saw
aggressive SL selling, with the cross moving sharply from 0.8730 to 0.8630.
Technically, with US equities closing on their lows, the Euro has just broken the
uptrend line from the October low at 1.3138, and is sitting at session lows around
Fibo support at 1.3830. The 4 hourly charts have unwound aggressively during the
session, continuing to point lower and the dailies are beginning to roll over now
from their recent strong upswing. There is likely to be a lot of volatility ahead and
price action could be extremely choppy in very nervous conditions.
As far as today is concerned, the hourlies are now quite oversold, so potential
progress lower towards the next Fibo support at 1.3700 is going to slow somewhat
and likely to see sharp corrections along the way. This will all change if the BOJ
show their hand again, which would likely pressure the Euro sharply lower. The
topside will see short term resistance at 1.3985 in Asia. Beyond here sellers should
emerge at 1.4035 and then at 1.4115.
Plenty of Data out later today including the EU Mfg PMI and the US ISM and
Construction Spending. Good luck
AUD/USD
The AUD/USDwent through the 1.0650 support yesterday when the BOJ showed
its hand and headed straight for the 1.0500 support, identified in the weekly
outlook, stopping at 1.0505 before rebounding to as high as 1.0610 in Europe
and then drifting lower again as US equity markets finished weakly (S&P down
2.5%).
Today will be influenced by the RBA and the action, or otherwise, by the BOJ. All
things being equal, the Aud is likely to have a reasonably quiet morning and
1.0500/70 should cover it. This may change if the BOJ intervenes when Asia
opens, which would see the Aud head towards the immediate support. If
1.0500 gives way then expect further downside, towards 1.0425 and possibly
1.0380.
Upside action should be limited to 1.0600 and beyond here resistance would be
seen at yesterdays support at 1.0650.
Aside from the RBA today we also get to see the China Mfg PMI for Oct which is
expected to show a slight improvement from the least reading of 51.2, and later
in the day, we get the US ISM and Construction spending, so plenty of
opportunity for a volatile ride!
