AUD/USD: 0.7560EUR/USD: 1.1150The FX markets were mostly choppy but rangebound heading into the weekend although the Aud$ and Sterling both posted good gains. Stock markets were also higher, boosted by a rise in the oil price. A busy week lies ahead, with Interest Rate Decisions to come from the BOJ, BOE, SNB and also from the US Fed. Generally no move is expected, with the probable exception of the SNB who are likely to follow the lead of the ECB. Much of the focus will be on the various statements/press conferences, with particular focus on when we might expect the next US rate hike. Given the strength of the US jobs figures recently, the Fed may surprise the market with a slightly more hawkish tone which would see the dollar regain some of its recent lost ground. Elsewhere, Monday will be quiet but Tuesday will be busy with the BOJ Meeting, the RBA Minutes and then later, the US Retail Sales. Wednesday could be highly volatile, with the FOMC Meeting, but before then sees the ECB Non-Monetary Policy Meeting, UK Unemployment and the US CPI (Feb), Building Permits and Housing Starts. Thursday gets the Australian Unemployment figures, the EU CPI (Feb) and the BOE Meeting, ahead of Friday, which is a bit thin on the ground with the Rts/Michigan Consumer Sentiment Index being the main focus.
AUDUSD continued its strong run higher into the weekend, helped along by firm commodity and stock prices as well as some positive risk sentiment that has seen renewed interest in buying “risk” assets. The Aud also has a yield advantage over most of its counterparts which is underpinning demand. If the Fed lean towards a dovish outlook this week, we can expect the Aud to see even larger gains.
The domestic highlights this week are going to be Jobs data and RBA Quarterly Bulletin, although for the most part, the Aud is likely to trade on the flows of risk assessment.
AudUsd is opening a little lower on Monday, currently at around 0.7535, after the release over the weekend of some slightly disappointing weekend Chinese data. The figures ( Jan Retail Sales 10.2% (10.8% expected), Jan Industrial Output 5.4% (5.6% expected), Jan Urban Investment 10.2% (9.5% expected) suggest that the recent easing measures introduced by the authorities are not yet gaining traction and that the government’s target of 6.5% to 7.0% difficult to achieve in Q1 without further stimulus.
Friday saw the US take the Aud up to a high of 0.7583 before finishing a little lower, at 0.7560. Another rally this week would see the Aud head on towards the May/June 2015 double bottom lows at 0.7597, beyond which, the next Fibo resistance is seen at 0.7648 (61.8% of 0.8162/0.6826) but is currently a long way off. In the longer term, the next major Fibo level is at 0.7845 (38.2% of 0.9504/0.6826).
A failure here would head back towards support which will be seen at the previous high of 0.7527 and at 0.7500. Back below here would see a run towards 0.7470 (23.6% of 0.7108/0.7583) although this is currently looking some way off. Further out, we could see a run back to 0.7400, which is now strong support, being both 38.2% of 0.7108/0.7583 and also 23.6% of 0.0.6826/0.7583.
The daily momentum indicators, while still looking positive, are in the process of becoming overbought, and with the 4 hour charts showing some bearish divergence, selling into strength with a SL placed above 0.7600 may be the short term plan.
Economic data highlights will include:
M: China Leading Economic Index
T: Australian New Vehicle Sales, RBA Minutes
W: WBC Leading Economic Index
T: Unemployment, RBA Bulletin, China Foreign Direct Investment .
Jim LanglandsFX Charts
