AUD/USD: 0.7820EUR/USD: 1.1175It has been a choppy session with some early US$ weakness being followed up with its return to favour later in the session, but with the end result being largely neutral as the market bides its time ahead of tomorrow's ECB meeting and Friday's US jobs data/NFP. The Aud was the main mover yesterday, on the back of the RBA decision, and will again be in focus today, on the release of the local Q4 GDP figure. Elsewhere, the main drivers will be the global services PMI's, the EU Retail Sales, US ADP Employment, US Markit Composite PMI and the ISM Non-Mfg PMI.
After the spike higher yesterday, on the news that the RBA had left rates unchanged, the Aud has run into decent sellers ahead of 0.7850, which is likely to remain the case today, at least until the release of the domestic GDP data. This is expected to come in at a slightly softer 0.5% qq, 2.5%yy, largely reflecting the ongoing downturn in the mining sector, and should this be the case it is hard to see the Aud making further significant gains. Also due for release today are both the local and then the HSBC China Services Indices.
If the data is generally better than expected, then 0.7850 is going to see a more serious workout and the 4 hour charts are hinting at this being a possibility. A topside break would then head on towards Aud up to 0.7880 and possibly even towards 0.7900, but if seen I would be a seller, with a SL placed above last week’s 0.7912 high, which comes in roughly in line with the sideways channel that appears to be forming, as per the chart. Note also that the Aud is also approaching the top of the major descending channel, at approximately the same 0.7900 level. If we do break above here, and take out the 0.7915/22 level (0.7922: 23.6% of 0.8910/0.7625) then the Aud could potentially head a fair bit higher, so will be worth keeping an eye on.
On the downside, if the data is soft, then 0.7800 will again come under pressure, beyond which, the Aud could then head back to 0.7770 and possibly to the strong support at 0.7750/40. I would be doubtful of heading below here for a while now, but if wrong, 0.7720/25 will be the next support ahead of 0.7700. A break of this level would then head towards the channel support at 0.7680 and on to the 12 Feb low of 0.7643 and the trend low at 0.7625. Eventually I suspect we will reach the RBA’s stated target of 0.7500, and from a technical point of view we could head a lot lower, although that would be a long term move.
In the short term the bias seems to be mildly higher, but 0.7900/20 is going to be a tough nut to crack.
Economic data highlights will include:
AIG Performance of Services index, GDP, HSBC Services PMI
Jim LanglandsFX Charts www.fxchartsdaily.com
