AUD/USD: 0.7640EUR/USD: 1.0825Equities were the big winner today on the back of a strong increase in M&A activity, while the dollar took on a bid tone in putting all its major counterparts under pressure, particularly the Aud which is finally taking notice of the low iron ore price and the increasing likelihood of another RBA rate cut. More of the same appears likely in coming sessions. Today will be another busy one, kicking off in Asia with a speech from the Fed’s Fischer. Later on there will be plenty to keep an eye on, with the German Retail Sales, EU/German Unemployment, EU Provisional CPI, Case Schiller House Price Index and US Consumer Confidence all due. Australia gets the ANZ Business Confidence, HIA New Home Sales, Private Sector Credit, while the NZ Building Permits is due shortly.
The Aud was offered from the start of trade, with the market finally beginning to focus on the combination of a probable RBA rate cut and a new trend low for iron-ore, with a generally bid tone in the US$ not helping the cause.
With little bounce from the session low of 0.7632, further weakness seems to lie ahead although 0.7600/10 will provide some decent support, having held on the last couple of attempts, but a break of which would then suggest a return to the trend low at 0.7559. A break of this would then hint at a run to the RBA’s stated target of 0.7500. I think we are eventually heading there and lower over time, below which there is not too much to hold the Aud ahead of 0.7414 (Oct 2010 low). Under here there is very strong support at around 0.7200 where two important Fibo levels are lining up (0.7210: 61.8% of 0.4773/1.1082 and 0.7180:76.4% of 0.6006/1.1082). I suspect that eventually 0.7000 will appear on the horizon (and eventually 0.6000!), but this is going to be some way off yet.
The hourly charts are actually making an attempt to turn higher, so on the topside some short term profit taking could see a return to 0.7665 and then to 0.7700, where minor Fibo/trend resistances lie. A break of this, unlikely today I suspect, would open up the way for a return to 0.7750 and to the next descending trend resistance at 0.7800, but which is beginning to disappear over the horizon.
Selling rallies looks to be back in full swing.
Economic data highlights will include:
ANZ Business Confidence, HIA New Home Sales, Private Sector Credit.
Jim LanglandsFX Charts www.fxchartsdaily.com
