AUD/USD: 0.7000
EUR/USD: 1.0800
Positive risk sentiment returned to the financial markets on Friday, assisted by a positive close to the week in Chinese stocks and then built on further in the US session by a strong rise in the oil price, which in turn helped stocks stage a decent rally. Both the US$ and the commodity bloc currencies were able benefit from the moves, while the main losers were the Yen, Euro and Chf. The coming week is going to be busy throughout, particularly towards the latter half of the week, although the focus is going to be on the FOMC Meeting on Wednesday and then on the BOJ Meeting on Friday. Other major highlights will be the RBNZ Interest Rate Decision and the US Durable Goods Orders, both on Thursday, and the EU Provisional CPI, Friday. Tomorrow is Australia Day and there will be no report.
Aud Usd added to Thursday’s gains on Friday, assisted by the return of a more positive outlook in global markets and it headed to a high of 0.7045 before giving up most of the gains late in the day, under pressure from a firm US$, to finish the week at 0.7000.
The main event this week will be the Australian CPI (Wed), but that aside there is little else on the calendar and it will be offshore flows and China that again provide the overall direction. It is the Australia day long weekend on Tuesday although it seems most of the country have awarded themselves holiday on Monday as well, so it could be a quiet start to the week.
It looks as though the Aud is going to consolidate near current levels early in the coming week, although the dailies do remain positive, so we could yet see a retest of Friday’s high, where further progress may be stifled by the sellers that are likely to gather at 0.7050. The previous attempt to break above here reached 0.7048 (13 Jan high) before a reversal that eventually took the Aud to the trend lows, and thus should be strong resistance. In the event that the Aud does break higher, it would then look towards 0.7075 (50% of 0.7327/0.6826), 0.7100 and then 0.7135 (61.8%) and 0.7208 (76.4%).
To the downside, support lies at the minor Fibo levels at 0.6993 (23.6% of 0.6826/0.7045) and then at 0.6962 (38.2%), 0.6935 (50%) and at 0.6910 (61.8%). Right now it does not look as though it is heading back down here and the dailies still suggest that for the next session or two, buying dips may be the way to go. Liquidity/Inertest though will be thin ahead of Wednesday.
Economic data highlights will include:
M:
T: Australia Day
W: CPI
T: CB Leading Indicator
F:.
Jim Langlands
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