AUD/USD: 0.7710EUR/USD: 1.0840The dollar took off like a rocket following Friday’s US jobs data, with the perception growing that a Fed rate rise is now on the cards, possibly as early as June. All the other major currencies took a battering and more of the same looks likely in the days and weeks ahead. This week sees a fair bit of secondary data, with some important numbers to come out of China (CPI, PPI, IP, RS), and which also sees the EU CPI and the US Retail Sales as highlights. That aside, Asia today sees the important Japan GDP and the Australian ANZ Job Ads, while later on we have a busy session headed by the Eurogroup Meeting, German Current Account, Trade Balance and the EU Sentix Investor Confidence Survey. The other major event this week will be the RBNZ Meeting/IR decision on Thursday.
Some relentless short covering ahead of the NFP took the Aud all the way from Friday’s Asia opening level at around 0.7770 up to 0.7848 just prior to the data release, before some sanity returned to the market when Aud reversed sharply to head back to where it had started from, and then after breaking strong 0.7740 support, on to the session lows seen later in the US afternoon at 0.7705. Given the sharp 3.55% fall in the Iron Ore price seen on Thursday, taking it below $60 per tonne for first time since 2009 – and heading lower, I suspect, given China’s downgrading of its growth outlook last week, – I could not understand what the Aud was doing up above 0.7800 in the first place, but it did offer a better level to sell it again!
Following the strong weekend Chinese trade surplus (+$60.08 bio, Feb) driven by exports (+$48.3 bio, imports -$20.5 bio) which has caused an early blip up to 0.7725 in the Aud, Chinese data will again be the key driver this week (CPI, PPI, New Loans, IP, RS, UI). Locally, today we get the ANZ Job Ads, and further out we get the Australian Business and Consumer Confidence, due Tues/Wed.
Now that we are back below 0.7740, I suspect that this will provide quite a strong cap, and would consider selling it should we see it, with a relatively tight stop at 0.7780. If the Aud does head above 0.7740/50, then we are most likely heading back into last week’s choppy consolidation area which has recently been using the 100 Month MA at 0.7760 as a pivot. Back above 0.7800, which I am doubtful that we will see again for a while, further resistance would be seen again at 0.7840 and 0.7860, but I would be surprised to see those now.
On the downside, a break of 0.7700 would then head towards the channel support at 0.7685 and then on to the 12 Feb low of 0.7643, and possibly to the trend low at 0.7625. Eventually I suspect that 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. I am still looking for 0.6000/0.6500 in the next 12/18 months , as per the monthly SHS target below.
It is a partial holiday in Australia today (Vic, SA, ACT, Tas), so liquidity will be a bit thinner than normal.
Economic data highlights will include:
M: ANZ Job Ads
T: China CPI, PPI, NAB Business Conditions/Confidence
W: WBC Consumer Confidence, Home Loans, China New Loans, Industrial Production, Retail Sales, Urban Investment
T: Consumer Inflation Expectation, Unemployment
Jim LanglandsFX Charts www.fxchartsdaily.com
