AUD/USD: 0.7750
EUR/USD: 1.1320
The majors took a back seat today, while the Aud, Kiwi, Cad and Chf all got crushed, and with no real end in site to the current trend. The metals took a beating as well, while WTI and Equities had a volatile session, but came back to finish pretty much unchanged. Today will see the EU CPI and US GDP and a weak/strong combination from them will see the dollar rally resume in earnest. Have a good w/e.
The Aud got hammered again yesterday, trading in heavy mode all day, initially following the Kiwi, on the back of the RBNZ statement, and then falling sharply once Europe got going, in part, as the result of an article in the Australian Telegraph that the RBA will cut rates on Tuesday. Terry Macrann who wrote the article is widely followed, but his track record over the last couple of years has not exactly been spectacular and while he may well be correct on this occasion, I would tend to be cautious on the prospect of a Feb rate cut. I suspect that the Aud$, being at its current levels is more or less doing the job of the RBA for them. At the last meeting, in December, the Aud was at 0.8440, since when we have had an 8.25% fall in the currency. If I were at the RBA, I would feel that this is as good as a rate cut anyway, and would think that with the currency making the economy more competitive, I would be tempted to sit on my hands and to keep my powder dry for a possible cut later in the year. In the meantime I would be waiting to see how the weaker currency flows into the economy..
If the RBA do cut, then the Aud will head towards the July 2009 low at 0.7700 and then towards the Fibo extension level at 0.7655 (100% of 0.8230/0.7857 from 0.8003). Beyond here we are looking at the RBA’s stated target at 0.7500, albeit not today.
On the topside, we are now at/below the 200 Month MA (0.7765) and this could act as a magnate in the short term. We are unlikely to head too much higher than this unless speculation of a rate cut next week diminishes although a squeeze towards 0.7800 should not be ruled out given that the hourlies are oversold and appear to be turning higher. Beyond 0.7800, which looks somewhat unlikely today, would find sellers at around 0.7840 (23.6% of 0.8230/0.7720).
If the RBA don’t cut, there will be an almighty short squeeze next week, so we are in for some interesting sessions ahead. All up though, trading from the short side remains the theme, with today’s EU/US data to be the drivers.
Look for 0.7720/0.7815 as a guide
Economic data highlights will include:
Private Sector Credit, PPI.
Jim Langlands
FX Charts
www.fxchartsdaily.com
