AUD/USD: 0.8000
EUR/USD: 1.1335
The long awaited ECB QE programme has now been revealed, and with Mario Draghi announcing an asset buying programme of Eur 60 bio per month commencing in March and continuing until September 2016, the Euro has duly headed sharply lower. Global equities liked what they saw and have all seen a decent rally, with the Dax at all time highs. The theme seems to be to expect more of the same over the coming weeks, with direction today to be provided by the global manufacturing flash PMI's, led off by China. The UK gets the December Retail Sales, and later on, from the US we get some secondary data: Chicago Fed National Activity Index, CB US Leading Indicator, Existing Homes Sales
Having bottomed out at 0.8055 in Asia yesterday, following the Bank of Canada’s surprise rate cut, which saw the Aud weaken in sympathy with the $Cad, it then bounced to 0.8135 ahead of the ECB announcement but has since given up all those gains and is currently back near the lows.
There have been some rather bearish observations out with regards to the Aud recently; last week Blackrock said it was heading sub 0.7000, and yesterday ANZ noted the critical week coming up, with the growing potential for the Aud to soon head below 0.8000. An ANZ note to client’s stated that “Should next week’s business confidence and CPI numbers look as soft, as we anticipate, a more sustained RBA easing cycle will be priced, and the AUD will break through USD0.8000”.
Before any data next week, keep an eye out for today’s HSBC China Flash Mfg PMI. Forecasts call for an improvement to 49.6 from December's 49.5 reading although this would still indicate a contraction, while a reading coming in below expectations would suggest further weakness for the economy and would pressure AUD/USD further.
For the time being the Aus is holding above the session low at 0.8055, and more importantly, it is still above the recent trend low of 0.8032 (7 Jan) although I dont see either of these hanging on for very long today. Below here, the downside momentum would look to carry the Aud below 0.8000 and on towards the important Fibo level at 0.7944 (61.8% of 0.6006/1.1080), below which, we then are headed to the July 2009 low at 0.7700 and beyond, possibly to the RBA’s stated target at 0.7500, albeit not for a while.
The topside will see resistance again at 0.8100 and at the 0.8135 session high. If the US$ maintains its general strength, then above here will be tricky, but further targets would appear at the 100/200 HMA confluence at 0.8170. Beyond here, 0.8200 currently looks out of reach, unless we see a decent sell-off in the US$, but were that to be the case, then further sellers would arriver at 0.8230 and at Friday’s high of 0.8255, ahead of the 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). Beyond this, the breakout level from below the base of the long term channel is seen at 0.8350 and should be strong resistance – and a decent sell opportunity – if seen.
Economic data highlights will include:
China HSBC Flash Mfg PMI.
Jim Langlands
FX Charts
www.fxchartsdaily.com
