AUD/USD: 0.6975EUR/USD: 1.1215It has been another fickle session, beginning with a strong rise and an equally strong reversal in US stocks, which were led lower by Apple and Energy shares, and which has in turn affected the “risk on/risk off” outlook in the currency markets, particularly in the Yen and Chf crosses. The RBNZ have cut rates by 25 bp, early in the NZ session which, coupled with some dovish talk from the Governor Wheeler, has seen the Kiwi dragged lower, taking the Aud with it. Today will be another busy one, beginning with the Australian Unemployment and the Chinese CPI/PPI. Later on the BOE Meeting will be the focus although there is once again little to drive the markets from either the EU or US. Markets will begin to focus on next weeks FOMC so liquidity will begin to thin out a little.
The Aud has now dropped back below 0.7000 following the RBNZ just cut rates and could see a run towards the 0.6975 initial support. Now waiting on the Unemployment data and the China CPI/PPI. The Aud initially headed higher in squeezing up to 0.7069 yesterday, as the “risk on” environment persisted over the first half of the session, although it has since turned lower again, in line with the selloff in US equities, and currently sits just above 0.7010.
The RBA deputy governor, Lowe yesterday delivered an upbeat assessment of Australia’s economy, saying it has the ability to adjust to the current set of challenges and that the weak AUD is helping the Australian economy. We shall find out if he is right today with the release of the local unemployment data (exp 6.2%, +5K, PR; 65%), which will be followed closely by the Chinese CPI. Before then, the lead will be given by the decision coming up shortly, from the RBNZ, on whether to cut rates. Expect 25 bp and a dovish RBNZ statement to keep the pressure on the Kiwi, with the Aud probably following in lower.
The initial support will be seen at 0.7000, below which will then head towards 0.6975 (100 HMA), and at 0.6950 ahead of 0.6900. As we said before, once back below 0.6900, there is little support until the April 2009 low at 0.6855, below which would then suggest a run towards 0.6773 (June 2004 low). A break of this would then open a black hole, in terms of support, until we reach the major Fibo support at around 0.6250 (76.4% of 0.4773/1.1082), which ties in with the lows seen in Feb 2009. Under here, we are then looking at our long term objective of the last 12 months at 0.6000, where the Head/Shoulder objective lies.
The topside will again encounter offers at around 0.7040 ahead of the 0.7069 session high. Beyond this would open up a run towards 0.7100, a break of which would lead to the Fibo resistances which lie at 0.7122 (23.6% of 0.7848/0.6900) and then at 0.7200 (23.6% of 0.8162/0.6900), where the major descending trend resistance also sits.
The charts are mixed, so a nimble stance is required, although in the short term a break below 0.7000 to test the 0.6975 support would not surprise. Go with the flow after the data.
Economic data highlights will include:
China New Loans, CPI, PPI, Australian Unemployment.
Jim LanglandsFX Charts
