AUD/USD: 0.7125 EUR/USD: 1.0770The US dollar remained largely on the sidelines on Friday, with most of the focus being on Equities, in trading within its recent ranges against most of its counterparts. A similar session could lie ahead today although the EU CPI is due and Mario Draghi will be speaking, who could cause some pain for the Euro if he reiterates his previous comments about the possibility of increasing the QE programme. Much of the focus is now on the diverging policies of the Fed/ECB, and this could keep the currencies within their current ranges until we get some clarity on policy from the ECB meeting (3 Dec), and which will be followed by the Fed meeting on 16 Dec. Ahead of the ECB meeting, the major points of focus this week will remain on inflation data, with both the UK and US figures due tomorrow. Elsewhere, the other major event will be the BOJ Meeting on Thursday. There will be the usual array of Fed speakers through the week.
AUDUSD had a choppy session on Friday but finished the week pretty much unchanged from the beginning of the day, at 0.7125, after having traded a 0.7105/58 range, and looks set to remain choppy but rather directionless early in the coming week.
Some secondary data is due on most days this week, but with the main focus likely to be on the RBA Minutes, tomorrow. It will be international flows that provide much of the direction this week, and with the RBA looking likely to stay on hold on Dec 3 it will be the possibility of a Fed rate hike on Dec 16 that will be uppermost in trader’s thoughts. Overall, as I have said over the last few weeks, until the Fed meeting I suspect that the 0.7000/0.7300 range will continue to hold.
The 4 hour indicators offer little hint in either direction but the daily indicators have now turned higher, and if we do see further gains look for a run back towards Friday’s high (0.7158), above which would see a sustained break the minor descending trend resistance and could then see a move towards 0.7195 (50% of 0.7381/0.7015). Above 0.7200 would head on towards 0.7210 (descending trend resistance), 0.7223 (4 Nov high) and to 0.7240 (61.8%) but seems unlikely to be seen for a while.
A downside break of Friday’s low of 0.7105 (200 HMA) and 0.7100 would see the Aud head back to 0.7085 (100 HMA), below which could see a return to 0.7065 (minor), 0.7050 and to the 0.7015/20 area which has recently provided decent support. Below there, further bids will arrive at 0.7012 (76.4% of 0.6900/0.7381) and then 0.7000. A break of this would then open the way for a steeper decline towards 0.6936 (29 Sept low) and to 0.6900 (4 Sept low) although at this stage this seems unlikely to be seen for a while.
Economic data highlights will include:
M: New Motor Vehicle Sales (Oct)
T: RBA Minutes
W: CB Leading Indicator, WBC Leading Economic Index, Wage Price Index
T:
F: China Leading Economic Index.
Jim Langlands
FX Charts
