AUD/USD: 0.8020EUR/USD: 1.0975The US$ remains under heavy pressure today’s after more soft US data, this time the Consumer Confidence, that comes ahead of today’s FOMC Meeting. Cable and the Aud in particular were very strong, but were followed closely by the Euro. A dovish Fed today will only see the dollar selloff continue and for the time being the bulls look to be in some trouble and appear to be squeezed further in coming days. The BOJ decision will also take place today – no change expected. Elsewhere there is a fair bit out of Europe, including the German Retail Sales, EU Consumer Confidence, Economic Bulletin and German Provisional CPI. Ahead of the FOMC, the USQ1 provisional GDP will be released.
The Aud has been busy cleaning out the shorts today, including me, who has been horribly wrong, not having seen a move of this magnitude at all.
The sharp rise in the Iron Ore price and the diminishing expectations of an RBA May rate cut has helped the push higher, but it does seem overwhelmingly driven by stop losses in market that has been caught very short of Aud.
Having now taken out the major resistances ahead of 0.8000, the Aud has reached 0.8024 where it has formed a double top with the 28 Jan high. Above this, the next level to watch is at 0.8034, the low seen on 5 Jan, and the Fibo resistance at 0.8048 (38.2% of 0.8910/0.7532). A break of this level would seem pivotal, as back above here would suggest a run back towards 0.8100 and possibly higher, and would put the longer term downtrend into question.
The downside support will see bids, below 0.8000, at 0.7970 and 0.7950 (both minor), ahead of the Fibo support at 0.7912 (23.6% of 0.7552/0.8024).
The short term charts are overbought and we could see a minor correction lower, but the dailies still look very positive so it seems that the downside is limited and that buying dips remains the gameplan, with the FOMC Statement to provide the main direction.
Jim LanglandsFX Charts www.fxchartsdaily.com
