Today has been relatively steady in the financial markets as we approach Friday’s FOMC meeting. The US$ is mixed, while equities are a little lower, following the lead set by the Asian markets yesterday, and which once again will provide the lead today. Today may provide some interim volatility as we await the Fed decision on Friday with a fair bit of data due for release. Highlights will be the BOJ Meeting/Statement and RBA Minutes, to be followed later by the UK CPI, the EU PPI, German/EU ZEW Economic Sentiment Survey, EU Trade Balance and Unemployment, and later again by the US Retail Sales, New York State Empire Mfg Index, Capacity Utilisation and Industrial Production.
AUDUSD had a rocky ride on Monday, initially heading up to 0.7135 in Asia before reversing lower, on the back of the soft Chinese equity markets, trading down to a low of 0.7063, from where it found new life after the swift resolution of the Liberal Party leadership vote, allowing the Aud to reach as high as 0.7151, seen in the US session.
The RBA minutes, today, might have limited impact due to the FOMC risk later in the week. The hourly charts are showing some bearish divergence and so further gains for the Aud might be limited in the short term, meaning that another choppy session may be in store for Asia. Note however that both the 4 hour and daily momentum indicators are positive and suggest that buying dips currently remains the favoured play.
If the Aud does head immediately higher, then above 0.7150 would see a run towards the descending trend resistance, now at 0.7175, a break of which would trigger stops and could carry the Aud on to 0.7200 (23.6% of 0.8162/0.6900). A break of this would lead back towards 0.7260 (38.2% of 0.7848/0.6900) but at this stage it remains over the horizon. Ahead of 0.7200, the 1 Sept spike high at 0.7152 will find interested sellers again today, having capped it so far.
The downside will find buyers at 0.7100, and again at the session low of 0.7063 (100 HMA). I don’t see it anywhere down here today, but if wrong, further declines would run towards last Friday’s 0.7035 low. Below this would then encounter bids at 0.7020 (200 HMA) and 0.7000. Below here looks unlikely for a while now, but further support would arrive at 0.6945 (session low) and then at 0.6900.
Further out, 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.
Economic data highlights will include:
New Vehicle Sales, RBA Minutes.
Jim LanglandsFX Charts
