AUD/USD: 0.7005
EUR/USD: 1.0865
Tuesday say another bounce in the oil price due to growing speculation of a potential cut in supply, which has underpinned US stocks and ignored the earlier heavy declines in the Chinese markets. Currency markets have generally remained on the sidelines while waiting for the FOMC meeting, due later today, although Cable climbed impressively, in line with the moves in oil.
Markets will most likely trade quietly for the next few hours, unless China has another big selloff, while waiting for the Fed, who are not expected to change policy but may take a rather dovish outlook on the global economy, which would place the dollar under some pressure. Australia gets the Q4 CPI.
AUDUSD has bounced from the move to session lows of 0.6918, seen earlier in the day on the back of a move out of risk assets which was associated to the 6% selloff in Chinese markets. The Aud currently sits at 0.7005 as it enjoys the recovery in risk sentiment, currently being driven by the higher oil/price and the firm US stock market close.
Ahead of the FOMC meeting, today’s domestic Q4 CPI data will be the main focus (exp 0.3% qq, 1.6%yy, trimmed mean 0.5%qq, 2.1%yy), with a soft reading likely to put a cap on the topside as far as the Aud is concerned. Another big selloff in China today would also add headwinds to any positive progress although the hourly momentum indicators are positive so we could see some near term gains towards the tough 0.7050 level, where we now have a minor double top. 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, back below 0.7000 would find minor support at 0.6970 (100 HMA) and then at 0.6935 (200 HMA) ahead of the session low of 0.6918. 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. If wrong, a break of 0.6900 would then see a run towards 0.6875 (minor) and on towards the double bottom at around 0.6825.
Economic data highlights will include:
CPI.
Jim Langlands
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