AUD/USD: 0.6960EUR/USD: 1.0880US stocks have had a tough ride on Wednesday, with an early rally being reversed and then crushed that has seen the S+US Indices heading to new 4 month lows. This move has wiped out the positive risk sentiment seen earlier in the session after yesterday’s improved Chinese Trade Balance. Both stocks and oil, the main drivers of the markets in the last few days, have closed near their lows and look to have further downside ahead of them. Currencies have generally been rather rangebound and mixed against the other pairs, and this could largely be the same today given the thin calendar of market-moving events from the either EU or the US. The $Aud will be an exception, where the focus will be on the December Jobs data, as will Sterling, where the BOE Meeting is due to take place – no change expected. Elsewhere it will be another day of watching China. From the EU we get the Eurogroup Meeting, German Real GDP Growth, ECB MP Meeting Accounts and from the US, the Jobless Claims, Import/Export Index (Dec) and a speech from the Fed’s Bullard. Tread carefully!
AUDUSD: 0.6955AUDUSD liked yesterday’s Chinese Trade data and took out plenty of stops in its run up to 0.7048. It hung on to those gains pretty much until the US session when the rally in oil and US stocks reversed, to head sharply lower, causing some risk aversion elsewhere, including the commodity bloc currencies. AUDUSD was no exception and now sits at 0.6960.
The local employment data will be the key feature today. These have been volatile but upbeat for the last couple of months, although the market is now expecting a weaker reading for this month. Expectations are for 5.9%; -12.5K, and for a Participation rate of 65.2%. Whatever comes out, will see a spike in one direction or the other, so be nimble!
China will again be closely monitored after the markets had a slide yesterday, to close down around 2-2.5%. Further losses today will add to the negative risk sentiment and keep the pressure on the downside.
A minor channel has formed, with the base right at the days’ closing levels. If we break to the downside, the Aud would revisit the previous session lows of 0.6940 and Monday’s low 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).
A good employment figure would see another rally towards 0.7000 and potentially on towards the session high of 0.7048, although the negative momentum indicators in the short term charts suggest that this is unlikely.
As I said previously, the dailies remain negative, and eventually I would expect to see levels substantially below 0.6900. Selling rallies remains the preferred strategy
Economic data highlights will include:
Unemployment.
Jim LanglandsFX Charts
