AUD/USD: 0.6900EUR/USD: 1.0890Global stock markets and the price of oil today were again the focus on Wednesday, each of which saw steep losses ahead of a bounce late in the day. The Yen was in demand early in the session on safe haven grounds, (as was Gold), while the commodity bloc were also very active. At the end of the session most pairs had returned to settle not too far from where they opened earlier in the day. The session ahead will be focused on the ECB meeting although no fireworks are expected. Policy is expected to stay unchanged and the markets are likely to pay more attention to what Mario Draghi’s statement/press conference has to deliver. There is little else besides, although the NZ Business PMI is due shortly. Watch out from any left-field statements from Davos.
AUDUSD: 0.6895 AUDUSD initially fell in early Asian trade from the session high of 0.6922, with neither the NZ CPI nor the local Consumer Confidence (January: -3.5% mm; prior -0.8%) helping its cause, and did not really look back until it reached its low of 0.6827. Since then though, we have seen a decent bounce late in the day, in line with a recovery from the lows in US stocks, to currently sit 0.6895.
Some minor local data lies ahead (New Home Sales) although the focus will again be on China and the Aud will again most likely track the direction of the stock market moves.
Technically, with the Aud having bounced to 0.6900 there little change to the overall outlook. Back above 0.6900, which looks very possible right now, could see a recovery to the 200 HMA (0.6935) and the 19 Jan high of 0.6956. Beyond there could see a run towards the descending trend resistance, now at 0.6990 and on to 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.
Should the Aud fail at current levels at around 0.6990 (100 HMA), the downside would see minor bids at 0.6850/60 and again at the day’s low at 0.6827, where we now have a minor double bottom. Below there would then take a look at 0.6800 and then at 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.
Fort the time being, further consolidation appears to be in store, with a mild short term bullish bias, but in the longer term there is no change in view that the Aud has plenty of downside potential.
Economic data highlights will include:
HIA New Home Sales, Consumer Inflation Expectation.
Jim LanglandsFX Charts
