AUD/USD: 0.6920EUR/USD: 1.0910Risk associated assets largely ignored the soft Chinese data and rallied, relieved that Chinese stock markets had carved out a decent session by gaining around 3%, spurred along by speculation that Beijing may further boost stimulus efforts. Since then much of the positive ground has disappeared as US stocks and oil turned lower although no major damage has been done. The commodity bloc currencies, including the Aud and the Kiwi, which might have been expected to remain under pressure, have actually put in a firm performance. On the other hand Cable has been under pressure, coming undone after some dovish BOE comments from the Governor, Carney. Coming up, the US CPI will be the main focus today, but with little to come from the EU. Ahead of that, the NZ CPI will be released shortly, ahead of the Australian Consumer Confidence. UK gets the Unemployment figures, which if soft would be another blow to Sterling. Canada has an interest rate decision and may see a cut, with Canada under pressure from the lower oil price.
Risk associated assets, including the Aud, generally remained underpinned today following the slightly weaker than expected Chinese data yesterday and despite an early dip lower (0.6838 low) it was back above 0.6900 in early European trade and has remained above there ever since. The Aud saw a high of 0.6956 early in the US session although it eased back as equities and the oil price began to slide lower.
The WBC Consumer Confidence due today may cause a few ripples (previous -0.8%), but more importantly, watch out for the Bank of Canada Interest Rate Decision later in the day. The BOC are under some pressure to cut rates because of the low oil price and if they do it could well have some flow -through to the other commodity bloc currencies, including the Aud, which would come under some downside pressure.
For the time being some more choppy trade above the 0.6840 level appears to be the most likely outcome and we could potentially see a squeeze higher that could take AudUsd back up to the session high (200 HMA), beyond which would all a test of the minor trend resistance at 0.7000. Above there, 0.7017 (38.2% of 0.7327/0.6826) will see offers ahead of the 13 Jan high of 0.7048. While the dailies still point lower, they are now oversold and suggest that a bounce is possible, so be a bit cautious on the downside.
Back below 0.6900 will find bids at around 0.6860/70 and then again at the 0.6836 low. It seems unlikely that the Aud will head down here today – unless we see another implosion in Chinese stocks – but below there would then test the trend low at 0.6826 and eventually 0.6800.
As we said previously, a break of 0.6800 would open the way to 0.6769 (29 March 2009 low). This should be strong, but a break of which would open the way towards much lower levels, with little support seen until the 15 Mar 2009 low at 0.6527 and then to the 1 March 09 low at 0.6284. Things could potentially begin to accelerate very quickly on the downside so will be worth watching very closely, with much depending on how the markets in China perform.
Economic data highlights will include:
WBC Consumer Confidence.
Jim LanglandsFX Charts
