AUD/USD: 0.7835EUR/USD: 1.1195The dollar made a good comeback against the Yen, Cable Aud and Kiwi at the end of the week although the Euro (and Chf) remains very firm, underpinned in part by some slightly improved EU data and some very strong performances on the crosses. The dollar does not appear to be completely out of the woods yet though and conditions are going to remain choppy, and very much event driven. This week sees the UK election, which will be pivotal for cable. Elsewhere, the RBA meet tomorrow, while the main economic event of the week will be Friday's US jobs numbers. There is plenty else aside, starting today with the EU Manufacturing PMI's, EU Sentix Investor Confidence Survey, ISM NY Index and Factory Orders. Australia gets the TD Inflation, Building Permits, ANZ Job Ads and HSBC China Mfg PMI. It is a holiday in Japan, UK.
The Aud headed lower again on Friday as the market appears to be reappraising the chances of an RBA rate cut tomorrow, after the previous short squeeze to 0.8074, on the back of higher Iron Ore prices and consequent lessening hopes of a cut. Having squeezed out many of the shorts, the Aud is now lower again, helped on its way by last week's SMH article that indicated that the RBA will be cutting. That being the case (23 out of 27 economists say they will cut), the downside points to watch will be at Friday’s 0.7802 low, where the 100 Month MA now sits and which has acted as a pivot for the last 5 months, but below which would retest 0.7753 (61.8% of 0.7552/0.8074) and 0.7740 (55 DMA). Back below this would then open up 0.7700 and the 21 April low at 0.7697.
In the event of there being no rate cut, the Aud will see another sharp squeeze higher, but in the meantime the topside will today see sellers at 0.7855 (100 HMA) and then at the minor Fibo levels of the fall from 0.8074 at 0.7865 (23.6%), 0.7905 (38.2%) and 0.7938 (50%), although I think the Aud will be lucky to break much above 0.7880 today.
There is a fair bit of data due in the coming session, which will cause some ripples, but the overall directional move will take place tomorrow. While the hourlies are pointing a little higher as they recover from having become oversold, the dailies now appear to be topping out, so selling into strength appears to be the plan, with a SL placed above 0.7940.
Economic data highlights will include:
M: TD Inflation, Building Permits, ANZ Job Ads, HSBC China Mfg PMI
T: HIA New Home Sales, RBA Interest Rate Decision, Statement
W: Retail Sales, HSBC China Services PMI
T: AIG Construction PMI, Unemployment
F: China Trade Balance.
Jim LanglandsFX Charts www.fxchartsdaily.com
