AUD/USD: 0.7670EUR/USD: 1.0600US Dollar strength reasserted itself again on Friday, causing Cable to fall to 5 year lows on UK Election concerns, while all the other majors -particularly the Euro – were also under pressure. Equities had a joy-ride, with the Dax and FTSE making all time highs, while the Nikkei topped 20K for the first time in 15 years. The US indices joined in and are currently not too far away from their own all time highs. This week is going to be busy, with plenty of data due, but with the highlights probably being the ECB Meeting (Wed) and the EU/US CPI, both due on Friday, while Greece will also not be too far from the headlines ahead of the April 20 deadline to present their revised economic reform plans. From Asia, there is plenty to come out of China, headed by the GDP, Retail Sales & Industrial Production (Wed), while Australia gets the latest Unemployment figures (Thur). Today’s focus will be on the Chinese Trade Balance and the BOJ Minutes. NZ House Price index coming up shortly.
The Aud had a choppy session on Friday, but stuck to the short term technical parameters. After testing the topside at 0.7721 it gradually slipped to a low of 0.7737 in Europe, where the rising trend support held it, before a squeeze back to just below 0.7700 and then settling at 0.7670 into the close.
For the time being it appears that the choppy 0.7630/0.7730 may contain it but it is going to be quite a busy few days ahead so we could get some reasonable movement. One of the reasons touted for the RBA wanting to stay on hold last week was so that they could monitor the latest data before making a move. They get their chance to do so this week with the release of the unemployment numbers (exp +15.6K, 6.3% and p.r. of 64.6%), Business Conditions/Confidence, Consumer Confidence, and then next Wednesday (22 Apr) we get the CPI reading. Today’s China Trade Balance will be important (expect +$45 bio; Imports -11.7%, Exports +12%) with plenty of China data also due Wednesday; the focus being on the GDP (exp 7.0%yy, 1.4%qq)and Retail Sales (exp 10.9%).
The Australian data recently has been increasingly underperforming of late, relative to consensus forecasts, and a disappointing jobs report on Wednesday will spur speculation on an RBA interest rate cut in May. Before then, a China GDP reading of sub 7% would disappoint the market and would keep the pressure on the downside for the Aud.
Technically it appears that we are in a rising trend formation, the parameters of which are currently 0.7645/0.7750 and with the short term indicators giving no real hint of breaking on either side, although the outcome of the China Trade Balance may decide differently.
On the downside, the 200 HMA is at 0.7640, and a break of Friday’s low (0.7637: daily Tenkan) would suggest a run to 0.7600. I doubt we are heading below 0.7600 today, unless the Chinese data surprises to the downside, but further out, the points to watch would be at 0.7559 (11 Mar low) and at 0.7532 (2 April low). Below here, the RBA’s line in the sand at 0.7500 will provide stronger support but a break of which would open up the way to 0.7414 (Oct 2010 low). Beneath this there is a bit of a black 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 even 0.6000!), but this is going to be some way off yet.
The topside will find sellers at 0.7700 and above, towards mast week’s high at 0.7737, where once again the daily Kijun/weekly Tenkan will provide a tough hurdle to crack. If wrong, above 0.7740 would head to 0.7780 (daily cloud base) and then on to 0.7800, where, as previously mentioned, I would be tempted to sell it.
Economic data highlights will include:
M: China Trade Balance
T: NAB Business Conditions/Confidence
W: WBC Consumer Confidence, China Retail Sales, Industrial Production, GDP
T: New Vehicle Sales, Unemployment, NAB Business Conditions/Confidence, China FDI
Jim LanglandsFX Charts www.fxchartsdaily.com
