AUD/USD: 0.7610EUR/USD: 1.0740The Euro fell to a 10-day low against the dollar on Tuesday, putting in the worst quarterly performance in its 15-year history. The US$ was mixed (although the quarter was the best performance since Q3 2008), putting in a generally solid performance, while weakening mildly against the Jpy. Equities gave up the gains of the previous session with a sharp decline late in the day, put down end-of-quarter/pre Easter position squaring. Today will be a busy one, starting with the Japanese Tankan and closely followed by the global manufacturing PMI's, beginning with Australia, Japan and China. Liquidity is going to get thinner so any moves could become exaggerated.
The Aud remains under pressure but has recovered from session lows of 0.7590 as it awaits the outcome of the local Building Permits data and then the domestic and HSBC China Manufacturing PMI's.
The downside still appears to be the most likely direction, and should this be the case, then below 0.7590 will find decent bids at the 11 Mar low at 0.7559. A break of this would then hint at a run to the RBA’s stated target of 0.7500, and as before, I think we are eventually heading there and a fair bit lower over time. Below 0.7500 there is not too much to hold the Aud ahead of 0.7414 (Oct 2010 low) beneath which there is a bit of a hole until the 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.
Rallies today should be limited to around 0.7640 although we could see a run towards 0.7665 if the data surprises to the upside. I don’t think we head above here today, but if wrong, then 0.7700 and possibly to the Fibo resistance at 0.7725 (38.2% of 0.7937/0.7590) would come into view.
Selling rallies remains the theme.
Economic data highlights will include:
Building Permits, AIG Manufacturing PMI, Official/HSBC China Manufacturing PMI’s.
Jim LanglandsFX Charts www.fxchartsdaily.com
