AUD/USD: 0.7610EUR/USD: 1.0920The dollar retains an underlying bid tone, particularly against the Yen – now at 13 year lows – after the firmer ISM manufacturing and construction spending data, although the Euro did garner some support during the session on the back of a rumour of a Greek deal with the EU. There was no substance to the rumour and the Euro ran out of steam as we still wait on some kind of resolution ahead of Friday’s headline to make the debt repayment to the IMF. Today kicks off with the RBA Meeting and the chance of an explicit easing bias being reinstated, after being left out at last month’s meeting. Later on will see the German Unemployment, EU CPI, PPI, US Factory Orders, Total Vehicle Sales and ISM NY Index for what will be another active session.
The Aud attempted to head higher in late Asia, reaching 0.7667, but being unable to overcome the selling interest in the 0.7670/80 area it has since headed lower after some choppy trade around the release of the ISM Mfg data, to reach a low, so far, of 0.7598 and now awaits the outcome of the RBA Meeting. No change is expected but the market is getting ready for a dovish outlook and an explicit return of the easing bias from Glen Stevens.
If so, the Aud will head lower, where beneath 0.7600, it would then look to retest the previous trend low at 0.7532 and the RBA’s line in the sand, at 0.7500. As before, I think we are heading there, and eventually, a fair bit lower, and below 0.7500 there is not too much to support 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 so don’t get too excited!
If the RBA are upbeat about their expectations (unlikely) or fail to mention any easing bias, then we are in for another nasty short squeeze back to 0.7670/80 and possibly higher. If the descending trend resistance at 0.7680 is taken out, then look for a bigger squeeze towards 0.7730 (23.6% of 0.8162/0.7598).
Trading form the short side, looking for a move towards 0.7500, seems to be the plan today although I would be looking to book some profits if we get to 0.7500/30, as the 4 hour charts are becoming oversold and the hourlies are showing some bullish divergence.
Economic data highlights will include:
RBA Interest Rate Decision/ Statement
Jim LanglandsFX Charts www.fxchartsdaily.com
