AUD/USD: 0.7800
EUR/USD: 1.1480
After doing little (AUD, NZD aside) for much of the session, the markets came to life in a big way, with the US$ undergoing a major sell-off as a short squeeze snowballed, with the chances of more to come. It was not just the dollar that saw a big move, with WTI gaining by about 8% on the day; 20% from the trend lows. The Aud and Kiwi regained all their earlier losses, and some – and the ASX SPI is at 7 year highs. Strange day’s indeed! Today’s focus is on the NZ employment number, due shortly, and then later, on the Non-Monetary Policy ECB Meeting, EU Retail Sales and then the US ADP Employment Change, which comes ahead of Friday’s key focus on the NFP
What a day for the Aud! After the RBA inspired sell-off took it down to a new trend low of 0.7625 in Europe, the bounce has seen the Aud rocket up to a high of 0.7850, where it ran into sellers ahead of the 26 Jan low at 0.7855, before settling at the end of the NY session at around 0.7800.
The generally positive momentum of the indicators suggest that the topside may not be done with yet, and although I think the greater downtrend will eventually resume, I am not sure that right now is the time to be putting on new short positions.
Above 0.7800 and the session high at 0.7850/55 would see a run towards the 200 HMA at 0.7870 and then towards the 38.2% Fibo level at 0.7913. 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.
Given that further rate cuts appear to lie ahead (March is being touted as likely), I think the current rally will be short lived (unless we see a major turnaround in the fortunes of the US$ – watch Friday’s NFP). That being the case, a return to the downside will find bids, initially at 0.7765 and then at 0.7715, both of which are minor Fibo levels. Beyond there, 0.7680 and the trend low at 0.7625 would again attract, but currently appear to be on hold.
There is no change in the longer term view, and eventually I suspect we are heading towards 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, but it won’t be bothered for quite a while.
Economic data highlights will include:
AIG Performance of Services Index.
Jim Langlands
FX Charts
www.fxchartsdaily.com
