AUD/USD: 0.7810
EUR/USD: 1.1335
The US dollar took a slightly softer tone after today's weaker than expected US manufacturing data, which followed a mixed outcome from the European numbers. Much of today's action will centre on the AUD, and the finely balanced opinion as to whether the RBA will, or will not, cut rates. The experts now seem to be generally leaning towards a cut, although I suspect that they may sit on their hands, but with an easing bias, waiting to see how the lower currency benefits the economy. Elsewhere, the EU PPI and UK Construction PMI, and then later, the US Factory Orders and Vehicle Sales will be in focus.
The Aud has seen some steady short covering ahead of today’s RBA decision, at which the economists seem pretty much evenly divided as to whether we will or won’t see a rate cut. I tend to think that the most likely outcome will be that they sit on their hands while leaning towards an easing bias.
No cut will see a sharp squeeze higher, which would take out the first Fibo resistance at 0.7837 (23.6% of 0.8230/0.7720) ahead of the 26 Jan low at 0.7855. Beyond this, there is not too much to stop the Aud heading higher towards the 38.2% Fibo level at 0.7913 and the 200 HMA at 0.7917. Beyond there would see the first greater degree of Fibo resistance at 0.7970 (23.6% of 0.8795/0.7720) where I am looking to sell into any potential strength, with a S L placed above the red pivot line seen at 0.8030.
If the RBA do decide to cut, then back below 0.7800 would head quickly towards 0.7750, the trend low at 0.7720 and then to the July 2009 low at 0.7700, which should provide strong support. If this is taken out the next stop for the Aud would most likely be at the Fibo extension level at 0.7655 (100% of 0.8230/0.7857 from 0.8003), beyond which we are looking at the RBA’s stated target at 0.7500. Under this there is little real support for the Aud until the next major Fibo supports to be seen on the monthly chart (below) at 0.7204 and then at 0.7183 (76.4% of 0.6006/1.1082 and 61.8% of 0.4773/1.1082). If/when seen, this area should be extremely strong support.
It will be a volatile session, but the overall trend remains lower as a rate cut is in the air. Whether it happens today or not remains t be seen, but trading from the short side remains the name of the game.
Economic data highlights will include:
Building Permits, Trade Balance RBA Decision/Statement.
Jim Langlands
FX Charts
www.fxchartsdaily.com
