AUD/USD: 0.7190EUR/USD: 1.1290The dollar rebounded from a three-week low on Friday, after the Fed had kept U.S. interest rates on hold, in a late technical rally after a steep sell-off during the previous session. Equities slumped on the back of Janet Yellen’s rather dovish press conference, with regard to the uncertain outlook for global growth. The coming week gets its fair share of secondary data, with the highlights likely to be a global flash PMIs and a speech from Mario Draghi on Wednesday, the US Durable Goods (Thur) and the Q2 US GDP (Fri). The Greek election result is due today, so keep an eye out for that.
The Aud had a volatile ride to finish the week, twice heading up to make intraday peaks, firstly at 0.7275 and then later at 0.7279, but both times being repelled by strong sellers that pushed it back below 0.7200, closing the week at 0.7190 and leaving the outlook mixed.
Today should be somewhat quiet in the absence of any local economic data, and the rest of the week only sees some secondary numbers, with the Caixin China Flash Manufacturing PMI being the most market moving event. Offshore event risk, led by Chinese equities will be the main driver this week. Japan being on holiday until Thursday will ensure a diminished level of interest from Asia.
Overall though, the price action looks set to stay quite volatile but possibly without too much direction, although, as I said on Friday, I think the Aud should receive some decent support, on a yield differential basis, now that US rates are on hold for another month – at least – , so further gains are possible.
In the meantime, the 4 hour indicators are overbought and appear to be turning lower, suggesting that any upside, back to the 0.7275/80 area, where the 55 DMA (0.7275) lies, is going to be slow and choppy. Before then look for sellers to arrive at 0.7205/10 and again at 0.7230 (both minor).
A break of 0.7275 would open the way towards 0.7300, above which the previous consolidation area of mid July/mid August would stretch all the way up to around 0.7430. Before then, 0.7200 looks as though it could be a struggle today, with interim minor resistances to be seen at 0.7220 and 0.7240/50.
The downside will find buyers at 0.7170 (100 HMA) and at 0.7160 (Friday low). Below this could see a return towards the 0.7135/40 area, a break of which would want to take a look at 0.7115 (200 HMA) and at 0.7100. Below 0.7100 would head towards 0.7080 (minor) and then to Fibo support at 0.7043 (61.8% of 0.6900/0.7279) and to 0.7000. I don’t see it down here for a while, but once back below 0.7000, we could then be in for another run towards 0.6945 (10 Sept low) and 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:
M:
T: House Price Index, China CB Indicator
W: CB Leading Indicator, Financial Stability Report, RBA Annual Report, Caixin China Flash Manufacturing PMI
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Jim LanglandsFX Charts
