AUD/USD: 0.7240EUR/USD: 1.0645The US$ ended Friday on a firm note, on the back of more hawkish comments from the Fed, this time from Bullard and Dudley, and over the weekend, Williams, who all hinted at a possible December tightening. At the same time the Euro is under pressure after further dovish observations from the ECB President, Mario Draghi, who expressed his willingness to add more stimulus to the EU economy in order to raise inflation. This week will see a fair bit of data, headed by the flash PMIs (Mon), US Provisional GDP (Tue) and US Durable Goods (Wed), although it is a shortened week due to the US Thanksgiving weekend, so liquidity is likely to be thin. On top of that, traders are likely to look beyond this week's event risk, and instead, wait for the key central bank meetings next month (ECB, Dec3; Fed, Dec 15/16).
AUDUSD seems headed higher on Friday, suggesting that the market is either growing comfortable with the prospect of a Fed rate hike or that it is caught very short and scrambling to cover. At any rate, while the European majors were diving for cover against the stronger dollar on Friday, the Aud was merrily making its way up to a high of 0.7249, closing just below its highs.
This week sees little domestic data to influence direction ahead of Friday’s Capex figures, which are always good for a bit of volatility, so most of the direction will come from offshore, with the US GDP and various Fed speakers likely to lead the way. Keep an eye on commodity prices, which show little sign of any significant rally and which would seem to impose further headwinds to the Aud in the days/weeks ahead.
Technically, I suspect the Aud is set to remain within a 0.7000/0.7300 range, possibly up until the Fed meeting on Dec 15/16 although we are now approaching the top end of that range, so some caution is warranted. Note that the Aud made a weekly close above the descending trend resistance that stretches back to June 2014 which could bring about further gains as stops and fresh buying could underpin it early in the week.
The weeks price action finished right on important resistance (61.8% of 0.7381/0.7015) although a break of 0.7250 could see an acceleration higher, towards 0.7295 (76.4%) and to 0.7300. Beyond here seems unlikely today although if wrong, the next realistic targets would be seen at 0.7363 (16 Oct high) and then at 0.7381 (12 Oct high).
To the downside, 0.7215/20 will provide minor support ahead of 0.7200. Below there could see a return to Friday's low at 0.7183, below which, 0.7160 is 38.2% of 0.7015/0.7249. Further Fibo levels come in at 0.7130 (50%), 0.7107 (61.8%) and at 0.7070 (76.4%).
As we said on Friday, the shorter term momentum indicators point a little higher and we could see some near term upside progress although they are in danger of becoming overbought, and medium term players will be looking to sell into any strength, hoping for another look at 0.7100 and eventually a fair bit lower as the US dollar momentum picks up in December and then again after the Christmas/NY holidays.
Economic data highlights will include:
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W: Construction Work Done (Q3)
T: Capex
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Jim LanglandsFX Charts
