AUD/USD: 0.7335EUR/USD: 1.1355The US$ remains heavy on Monday as the follow-through from the NFP and last week's FOMC Minutes continue to echo through markets, with the risk based currencies - Aud, Kiwi - again being major beneficiaries, while the Yen suffered on Friday as it returns to its funding role given the positive risk sentiment that currently exists. On the other side of the coin, Mario Draghi reiterated on Friday that the ECB is ready to upwardly adjust its QE program, which should ensure that the upside for the Euro is somewhat limited. The first half of the coming week, particularly today, is going to be fairly quiet, with little data - and holidays in Japan/US - to provide guidance. Things warm up midweek with the release of a fair bit of US data (Retail Sales, CPI, Industrial Production, Capacity Utilisation, Rts/Michigan Consumer Sentiment Index) to give further clues as to the Fed's thinking on the timing of a rate hike. From the EU, the highlights will be the German/EU CPI data and the ZEW Economic Sentiment Survey. Elsewhere this week, focus will be on the BOJ Minutes, China, UK CPI and Australian Unemployment.
The Aud had another positive day on to finish the week as risk based currencies continued to recover in the wake of the current soft US$ picture, with higher commodity prices (Copper +3.3%, Gold +1%) doing the Aud no harm either.
The coming days will see some important economic data to guide direction, including the NAB Business Confidence/Conditions and the WBC Consumer Confidence, although the focus is going to be on the Chinese CPI (Wed), where a further slowing of inflation will not do the Aud any good, and then on Thursday the domestic employment figures will be released (exp +17K, 6.2%, PR; 65%).
While risk sentiment remains positive, the Aud will continue to benefit. Having seen an early dip on Friday to 0.7247, the Aud never really then looked back through the rest of the session, in heading to a high of 0.7343, closing nearby. While the momentum indicators remain positive, the 4 hour charts are now becoming overbought so some caution is warranted by longs at these levels, however the dailies still suggest further potential gains, so a break of Friday's high could see a run towards the 21 Aug high at 0.7359, and eventually to 0.7375/80 (100 DMA/23.6% of 0.8162/0.6900), which will be a high hurdle to overcome at the first attempt. Above here though would head on to 0.7400 and then to the major descending trend resistance, currently at 0.7420, a break of which would trigger plenty of stops and could propel the Aud a fair bit higher, although at this stage this is some way off.
To the downside, bids at 0.7300 will provide the initial support, below which will see a decline towards 0.7275 (minor) and then towards the rising Fibo support, now at 0.7245 (23.6% of 0.6936/0.7345). Below this would open the way for a return to minor supports at 0.7235 and to 0.7215 ahead of the 100 HMA at 0.7200 and the next Fibo levels at 0.7186 (38.2%) and 0.7140 (50% pivot).
Buying dips still appears to be the plan.
Economic data highlights will include:
M:
T: NAB Business Confidence/Conditions (Sept), China Trade Balance
W: WBC Consumer Confidence, China CPI, PPI, NAB Business Confidence/Conditions Q2
T: Unemployment, WBC Leading Index, Consumer Inflation Expectation, New Vehicle Sales
F:
Jim LanglandsFX Charts
