AUD/USD: 0.6980EUR/USD: 1.0880Improved sentiment allowed risk associated assets to climb higher after the ECB President, Draghi surprised markets by suggesting the possibility of further stimulus for the EU as early as March and came after the ECB had left rates unchanged in January, as expected. Oil also moved up strongly, by around 5%, after U.S. crude stockpiles rose less than the markets had feared, further underpinning the more positive outlook. Stock markets liked the outcome and this helped the risk associated assets, including the commodity bloc currencies to have a solid session, while safe-haven assets such as the Yen and Gold have come under some minor downside pressure. Looking ahead, the EU and US Markit flash Mfg/ Non-Mfg PMIs will be the main events of the Friday session. Mario Draghi will also be speaking but is unlikely to add too much to what he said at yesterday’s Press Conference. From the US, we get the Existing Home Sales and the Chicago Fed Activity Index. Have a good weekend.
AudUsd had a positive session on Thursday as markets regained a risk appetite, led by the strong bounce in the price of oil and also due to the chance of further ECB easing. The Aud headed up to a high of 0.7011 in the US before giving up some of those gains late in the day, in line with a retreat from the high in US stocks, to close at 0.6980.
There is no data due in the coming session so it might be rather choppy, and the near term direction is once again likely to be driven by the Chinese markets.
Given the positive look of the 4 hour charts further gains could lie ahead, where 0.7000 will provide some minor resistance ahead of the session high at 0.7011 and the nearby Fibo resistance at 0.7017 (38.2% of 0.7327/0.6826). Beyond that, the 13 Jan high of 0.7048 should be quite a tough hurdle to cross although a break to the topside would then look towards 0.7075 (50%), 0.7100 and then 0.7135 (0.7135). Although the 4 hour charts do look positive, the hourlies are now rather overbought and any upside progress would appear to be rather slow, should we see it. More likely a choppy session, with a mildly bullish bias seems possible and a test of the Fibo resistance at 0.7017 would seem quite likely.
A failure here would head towards the previous minor double top at 0.6955 and then the to 200/100 HMAs, seen at 0.6930 and 0.6895 will provide the initial support levels. I don’t really see the Aud under here today, but if wrong, look for further losses towards the session low of 0.6875 and then to the 0.6825/30 area that has provided recent strong support and comes ahead of 0.6800.
In the longer term, as before, below 0.6800 would then head towards 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.
Economic data highlights will include:
China MNI Business Sentiment Indicator (Dec).
Jim LanglandsFX Charts
