AUD/USD: 0.6990EUR/USD: 1.0860Currencies were mostly choppy on Monday but largely rangebound, with the action largely being driven by stocks and the oil price. While WTI has lost more ground, global stocks have so far held up reasonably well following the 5% selloff in China and are finishing the US session with a bit of a bounce. Today is going to be another session where the focus will be closely tied to the movements in China, and a repeat of yesterday’s moves would see the risk aversion pressure build, particularly in global stocks and also in the commodity bloc currencies. There is little data to be seen elsewhere today, with the highlight being the UK manufacturing data. Be nimble!
AUDUSD had an early fall to 0.6926 but then staged a recovery, despite the weak Chinese stock markets, to reach a high of 0.7035, before giving up some of those gains, in line with a downside move in US stocks, to finish at 0.6975. A late US stock market rally is taking the Aud back to 0.6990 into the close.
Monday’s range 0.6926/0.7035 could hold for the coming session, and in the absence of any data today it will be another day of paying attention to what the Chinese markets get up to. A repeat of yesterday’s action in China though will see the downside pressure return to the Aud.
As I said before, in the short term, the charts are oversold and the 4 hourlies are now beginning to point higher, so I would not be too aggressively short at these levels. Minor resistance arrives at 0.7000 and then again at the session high at 0.7035 (100 HMA) and then at 0.7078 (23.6% of 0.7327/0.6926/ Friday high; 0.7076). Beyond there could see a run to 0.7100 although this looks doubtful for the time being.
Another Chinese implosion would see the Aud retest the session lows of 0.6926, below which would then open the way to the trend low of 0.6900 (4 Sep). Note that there is little to underpin the Aud under 0.6900 and the next meaningful support would not be seen until 0.6769 (March 2009 low).
Eventually I said yesterday, I would expect to see levels substantially below 0.6900 and selling rallies remains the preferred strategy.
Jim LanglandsFX Charts
