AUD/USD: 0.7825EUR/USD: 1.1345Janet Yellen’s testimony to Congress painted a slightly dovish picture, citing the need for flexibility, with the Fed unlikely to be in any hurry to raise rates, at least for the next couple of meetings or until they see further improvements in unemployment, inflation and the global growth outlook. The markets have been choppy, sending the US$ a bit lower and equities higher. More choppy trade looks to be in store today in the absence of any data, although both Yellen and Mario Draghi will be speaking, as will the BOE’s Carney. A bit of data from Australia will be the Asian focus, with the HSBC China manufacturing data being the highlight, but that aside there is not too much to go on, with China still out for the NY celebrations.
The Aud has had another volatile session but has remained within the recent range, but looking as though a test of the topside could lie ahead.
After selling off to 0.7740 in Europe, triggered by the lower NZ inflation outlook from the RBNZ, it has since bounced around and ended up by spiking higher, to reach 0.7826, following Janet Yellen’s testimony.
The short term charts are looking a bit more positive, although there is still plenty of interest to sell the Aud ahead of 0.7850 and the Aud may well have some of the steam taken out of it if the data due today is soft, particularly the flash China Mfg PMI (previous 49.5). A reading above 49.5 would see a a squeeze to higher ground, spooking some of the shorts.
Technically, despite today’s volatility, no new ground has been broken.
On the topside, there is still plenty of interest to sell the Aud at 0.7835/45 area, near the minor descending trend resistance, ahead of 0.7850, beyond which will want to take a look at the 6 Feb top at 0.7876, which should be strong resistance. Above here could see a run towards 0.7895 (23.6% of 0.8794/0.7625) and then to the 50% pivot of 0.8230/0.7625 at 0.7925. Above this could then see a run back towards the Fibo resistance at 0.7995 (61.8% of 0.8230/0.7625) for a more sustained look at 0.8000, beyond which would trigger a serious amount of stops with the potential for a run towards 0.8100, although I don’t really see it happening.
On the downside, minor supports are seen at the 100/200 HMA’s at 0.7800/0.7790, a break of which may see the Aud back at 0.7775 and possibly at the session low at 0.7740 (daily Tenkan), although this seem unlikely today. Below there, 0.7720/25 will be the next support ahead of 0.7700, a break of which would then head to minor support at 0.7665/70 and possibly on to last Thursday’s session low of 0.7643.
In the longer term trading from the short side remains preferred, although today it may be worth waiting to see if we get a squeeze above 0.7850/70 before doing so.
Economic data highlights will include:
Chinese NY, Australian Construction Work Done, Wage Price Index, HSBC flash China Mfg PMI
Jim LanglandsFX Charts www.fxchartsdaily.com
