AUD/USD: 0.8170
EUR/USD: 1.1840
After coming under mild early pressure, the USD turned sharply higher in Europe before giving up some of its ground in NY as equity markets headed lower on the back of weak oil prices which made an new trend low. While the majors have now largely recovered their earlier losses, the commodity bloc have been left behind and remain soft, and will rely on a strong Chinese Trade Balance today in order to make up the lost ground. Elsewhere there is not too much to go on today (German Wholesale Price Index), aside from the UK CPI, which may make for a busy day in Cable. Japan sees Current Account, Trade Balance
Having spent the first half of the session squeezing higher to reach 0.8254, broad based US$ strength in Europe's morning saw a sharp reversal, taking the Aud down to a session low of 0.8130. Whereas the other majors have largely regained their ground against the US$, the Aud has found it difficult to do so and currently sits at 0.8160, not helped by the lower oil/equity prices and the flow-through effect on risk aversion, principally in the commodity bloc.
In the short term I am pretty neutral on the Aud, but suspect a choppy day of 0.8120/0.8200 may largely cover it with direction to be dictated by the China Trade Balance (exp +50 bio, Export +6.8%, Imports -7.5%). Further out, the market will be looking towards Thursday’s local jobs data for inspiration. The headline rate is expected to remain unchanged at 6.3% while employment is expected near flat after a 42.7k gain in Nov.
A move back to the topside will now find sellers at 0.8200 and then again at 0.8230 and at the session high at around 0.8250. Above there looks unlikely, but if wrong would head towards recent minor highs at 0.8273 and 0.8298, with the next Fibo resistance not seen until 0.8321 (38.2% of 0.8795/0.8033).
The downside will find support at the daily Tenkan, now at 0.8140 and then at the 100/200 HMA’s at around 0.8125/30.
While the longer term US$ uptrend remains intact, in the shorter term it does look as though we may be in for a period of consolidation above 0.0800/30 before any real upside progress can resume. If the Aud does head below 0.8100 today, then we are eventually likely to retest the recent low of 0.8032, below which further downside momentum would then look to carry the Aud beneath 0.8000 and on towards the important Fibo level at 0.7944 (61.8% of 0.6006/1.1080). Below there, then we are headed to the July 2009 low at 0.7700 and then possibly to the RBA’s stated target at 0.7500. This is all rather looking to be on hold for the time being.
Economic data highlights will include:
China New Loans, Trade Balance.
Jim Langlands
FX Charts
www.fxchartsdaily.com
