AUD/USD: 1.0000The Aud did not know what hit it late in the week, falling by about 2.5% after the rally following the better jobs data on Thursday, undermined by the move in the Yen and some hawkish comments from some Fed Board members.
Looking ahead, we have plenty of data out this week, with the market looking to focus today on the Chinese Retail Sales, Industrial Production. Any sign of further slowing from China will pile the pressure back on the Aud and suddenly parity will be difficult to hang on to. The eventual target, as I have continually harped on about for about the last 9 months, remains the E leg of the major triangle, currently at around 0.9850 (chart), which is where I would be squaring up all short positions.
Bounces now look to be limited to 1.0100 although it is possible that we need to leave room for a squeeze up to 1.0190 (38.2% of 1.0580/0.9960) and if the data on Monday is better than expected, the shorts could feel a bit of pain.
Having started the week a little lower, trading down to about 0.9990 in very early trade, the intraday indicators actually do suggest the possibility of a bit of a squeeze to the topside, but unless the data is stellar, I would not expect too much above 1.0070 today, and even that may be a leap too far. I would still be looking for rallies to sell into though and as well as the China data today we have the local Home Loans and NAB Business Confidence figures to provide us with an opportunity to get short at improved levels.
Don't forget the Budget on Tuesday. While it may not have any immediate effect on the Aud, much interest will be written into how the Government intends to show a commitment to eliminating the budget deficit and get back into a surplus by 2016/17. As Standard +Poor's have already hinted; while it does not expect an immediate turnaround, it does want to see the government demonstrate continued commitment to prudent fiscal policy in the medium term. If not, the AAA rating will be history and the Aud won't be at parity.
GBPAUD: 1.5320. The cross surpassed even my most optimistic expectations last week, taking out the 1.5390 long term resistance and reaching 1.5421 before retreating into the close. This has been a great run up from 1.4650 when we first got on board and meeting the resistance means that we have now squared up, and intend to stand aside while the market sorts itself out for a while. There is no real sign that the trend is going to change, but the dailies are very overbought and some consolidation near here may be in order. I will be leaving bids at around 1.5170/1.5200 area next week, which I don't really expect to get set - at least on Monday/Tuesday - but you never know your luck. Downside stops should be placed sub 1.5150 I think, but we are looking for another run, eventually to take out 1.5400 and then to head on towards congestion at around 1.5500 and then possibly to the 31 Dec high at 1.5675. Don't expect instant gratification here. It could take a while, while the dailies unwind.
EURAUD: 1.2955. The cross continues to perform impressively but has come to rest at important resistance; sitting right on 76.4% of 1.3190/1.2223 and ahead of 1.3000 so further progress may be a bit tricky in the near term. I am square but looking to buy dips in the region of 1.2850/1.2900 with a SL at around 1.2750, looking for an eventual run above 1.3000 towards 1.3150 and possibly to the Feb high at 1.3190. The 4 hours have started to show some bearish divergence and thus I think we have a good chance of getting set on a bit of a dip in the next couple of days.
Economic data highlights will include:
M: Home Loans, NAB Business Confidence/Conditions, China Industrial production, Retail Sales, Urban Investment
T: Federal Budget
W: WBC Consumer Confidence, New Car Sales, Wage Price Index
T:
F: WBC Leading Index, China CB Leading Index
