AUD/USD: 0.7270EUR/USD: 1.0975Soft EU manufacturing data offset underwhelming US housing data on Friday, meaning that the majors were mixed but without any real directional moves into the weekend. This did not apply to the commodity bloc, where the Aud in particular suffered badly, finishing at new 6 year lows - and looking as though there is plenty more of the same to come in the weeks ahead. Global equities took a hit, not helped by the global growth outlook and also appear to have further downside ahead. This week’s main event - probably providing the market direction into the weekend - will be the FOMC meeting (Wed), where although no change in policy is expected, markets will be closely watching the wording of the statement from Janet Yellen for any hint of when to expect the first Fed rate hike. Elsewhere, it will be busy throughout the week, beginning today with the release of the German IFO Business Climate/Expectations, US Durable Goods Orders.
The underwhelming Caixin China manufacturing PMI was the straw that broke the back of the Aud on Friday, causing it to head down to 0.7260, ahead of a mild bounce into the end of the US session, assisted by some soft US data which put the US$ under a little pressure of its own.
Commodities had another tough day, although Copper did manage to stall its recent losses (Brent crude -1.14%, WTI -0.8%, Aluminium +0.5%, Copper +0.1%, Gold +0.3%), but the outlook is not encouraging.
This week sees some secondary data, although the spotlight will be again be on commodity prices, which as I said, do not look at all healthy and in the medium term will continue to be a drag on the Aud. The main event risk will come from the FOMC Meeting (Wed) where a hawkish Fed would put a further bid tone under the US$, keeping the downside pressure on commodities and on the Aud as yield spreads continue to contract..
Technically, things do not look positive either, and having finished the week below the 0.7285/90 support the way looks open to much lower levels with the 4 hour charts suggesting little relief to the topside. There is very little support until we get to the monthly charts, where the next target will be at the very strong level at around 0.7200, where two important Fibo levels are lining up (0.7210: 61.8% of 0.4773/1.1082 and 0.7180:76.4% of 0.6006/1.1082) and which could appear on the horizon rather quickly. Taking some profit on short positions near here, looking to re-sell into any potential bounce seems to be a plan. If wrong, and the support does not hold, then the Aud is on its way to test the major rising trend support from Sept 2001 - joining the Sept 2009 low,- currently at 0.7130.
The topside currently looks capped at 0.7300, although maybe we should allow the possibility of a return to 0.7350. If the Fed turn out to be a little dovish on Wednesday then the US$ will come under pressure, giving the Aud a reprieve which could see a further squeeze towards at 0.7375 and possibly at 0.7400, above which will run towards Thursday’s high at 0.7416. I don’t think we are likely to get close to this, but if wrong, further gains would take the Aud towards 0.7430 (minor) and the weekly high of 0.7448.
Any noteworthy rally appears to be a decent sell opportunity and as I have droned on about many times before I suspect that eventually 0.7000 will eventually appear on the horizon. In the longer term, so will 0.6000 I think http://www.fxchartsdaily.com/audusd-aud-heading-0-6000-check-monthly-chart/ . If correct, this is going to be some way off (2016/17?), so don’t get too excited yet as the carry will be expensive!
Economic data highlights will include:
M:
T: NAB Business Conditions/Confidence
W:
T: Building Permits, Import/Export Price Index
F: Private Sector Credit
S: China NBS Mfg, Non Mfg PMIs.
Jim LanglandsFX Charts www.fxchartsdaily.com
