EUR/USD
US unemployment surprised the market and dropped to 8.3% while the Non Farm
Payroll data improved by 243K on Friday. Risk assets breathed a sigh of relief and
equities had a good day with most indices closing up by about 1.5%. As equities
continue to perform and sentiment improves, expect the dollar to remain pressured as
investors return to putting on higher risk positions as they move away from the safe
haven of US Treasuries.
Against the Euro though, the situation, as usual, is complicated. Thursday sees the ECB
Interest Rate decision, where no change is expected, and this will be followed by
Draghi’s Press Conference. More pressing however, is the Greek debt deal, which
appears to have a never ending deadline and has the market becoming increasingly
disillusioned about the possibility of a positive conclusion. On top of this, it appears that
further austerity measures may be knocked back which would halt the next bailout
package and therefore presumably lead straight to default and set the dominoes falling.
IIF demands for a 25% reduction in the private sector minimum wage, as well as tougher
public sector spending and job cuts have naturally not gone down all that well in Athens.
Technically there isn’t much change from Friday. The Euro continues to consolidate
between the Fibo levels of 1.3005/1.3240 and in Asia, Monday, it is likely that
1.3090/1.3190 will cover it. Above 1.3240, 1.3350 and then 1.3435 would attract but I
don't see that being an issue, early in the week. A downside break of 1.3005 would see
an attempt on 1.2925, and likewise this looks unlikely in coming sessions. The 1 & 4
hourly charts are now more or less flat and the dailies are suggesting mildly higher levels
to come. The choppy conditions look likely to continue, but I suspect the game plan is to
search for dips to buy the Euro, with the idea that 1.3240 resistance will eventually give
way for a test of 1.34, or thereabouts. Greece could of course turn that idea on its head
very quickly, so remain flexible.
Apart from the ECB, we get the German CPI, Friday to rev it up at the end of the week.
AUD/USD
The Aud was the big winner on Friday as risk positions were reinstated following the good US numbers. Having finally broken through the 1.0750/65 resistance the Aud headed to 1.0794, before settling back to 1.0770. It remains nicely within the channel though and looks fairly happy near the top end of it, with further gains a possibility next week, barring any major disasters from Europe that would see a brisk turnaround in risk sentiment. As usual Greece will be decisive and if there is no positive outcome from the debt negotiations, don't expect to find the Aud above 1.0700!
In the meantime, 1.0750 now provides short term support above the 1.0685 pivot. A break
below here would most likely see some decent stops being set off and a return to the base of the channel, that currently coincides with the 23.6% Fibo support (0.9660/1.0794) at 1.0530,
would be on the cards. A break of this would most likely see a return to the 1.0350 area.
The topside continues to look favoured, but I am becoming increasingly wary of the
overbought nature of the daily charts. Despite the channel looking to continue higher, we are due for a correction. Maybe the market has not really been long, but, having broken through 1.0750 will now start to become comfortable with the thought that we are going to retest 1.1080. If that is the case, a couple of days trading up at these levels and possibly higher, may allow for a cleanout to the downside as the week progresses. It looks though, that dips will continue to see support from offshore investors and 1.0685 should provide a base early in the week. If this gives way I think it will head lower towards the base of the channel. On the topside, above 1.08, the next target would be 1.0880 (11 May high), but I think progress may slow a little up there.
Of course we have the RBA on Tuesday, where it looks a racing certainty that the RBA will cut rates. How much the Aud reacts, remains to be seen and much will depend on how risk
sentiment is being viewed at the time. Certainly the market seems to be taking it pretty
much in its stride at present. China CPI is due on Thursday.
The Aud crosses are also providing support with demand for Aud to be seen against Eur
(1.2220), Gbp (1.4690) & Jpy (82.50). Eur/Aud made another all time low (1.2167), Friday, &
Gbp spiked down to 1.4647. Eur & Gbp, having jumped higher 2 weeks ago, have since lost all those gains & more, and the Aud looks as though it will remain bid against the majors.
