AUD/USD: 0.9755The Aud got a reminder of the good old days last week - circa 1984! - and since the better jobs data of the previous week, that took it to 1.0253, it has been a vertical slide to 0.9710, and now that we are beneath our long term triangle base of 0.9850, it looks as though there is plenty more room yet on the downside. Carry trade investors are beginning to look rather nervously at where the Aud is trading, given the RBA minutes that lie ahead on Tuesday, and which may well hint of another rate cut, and if that ball starts to gain momentum there could be an unholy rush for the exit. At present, this is more a US dollar move and so the crosses are not yet too affected, but keep a very close eye in case they continue to accelerate higher at the Aud's expense..
In the meantime, against the US$, the Aud has come to rest near the 76.4% Fibo (0.9386/1.0855) support at 0.9735. If we head below Friday's 0.9710 low, there is not too much to stop it from heading to the Nov 2011 low at 0.9660 and then to the June 2012 low at 0.9580.
The 4 hour charts are at oversold extremes though, and we need to leave room for a bounce which could potentially be quite strong, once the market has had the time to wake up and become suitably short. For now, 0.9800 will see near term sellers, above which, the base of the long term triangle at around 0.9850 should prove quite strong. This is also roughly where the 23.6% retracement of last week's fall lies and thus may hold it, but if we break back much above 0.9860 now, the shorts will start to become a bit nervous, as we then have the potential to head back to 0.9965 (short term down trend resistance / 38.2% of 1.0381/0.9710) and if we go above parity, this would see a decent clean-out and have us all rather confused. We will deal with that if/when we get there, and in the meantime rallies towards 0.9850 appear to be selling opportunities for further weakness ahead.
One thing to note is that the IMM Futures market speculative positioning data from the CFTC as of the close last Tuesday shows that the market is now net short for the first time since June 2012, so we could be in for a bit of a bounce to shake out the late comers. Having said that, the speculative shorts are not yet out in such numbers for the market to be too heavily weighted towards the short side.
As already mentioned, the RBA Minutes will be the week's highlights and on the basis that they are likely to be rather dovish again we can expect the overall pressure to remain on the downside.
Looking at the very long term, having broken the base of the triangle at 0.9850, it could be argued that the move from 1.1080 (27 July 2011) which saw a sharp drop to 0.9386 (03 Oct 2011) - a 17 cent move, could manifest itself in another move of similar proportion from the (approximate) 1.06 triangle apex, meaning that we could eventually see the Aud back at around 0.8900. Conveniently, a channel line, drawn parallel to the top of the recent triangle, joining 1.1080/1.0850 (Feb 2012), beginning from the 0.9386 Oct low, currently leads to 0.8900! On top of that it is also roughly the 161.8% projection of the move from 0.9580 (1 June 2012) to 1.0624 (14 Sept 2012)). Very exciting...at least I think so! My wife thinks I need to get a life! Anyway, we shall see, but don't get too enthusiastic yet as there is still much water to go under that bridge.
EURAUD 1.3192. The Euro did as we thought it might and has reached the Feb high at 1.3190 (actually trading up to 1.3225 briefly). Unfortunately, the bids that we left in the market to buy the cross, were slightly too low and we never got set, - so another opportunity missed! Never mind, I am still looking to buy dips, this time towards 1.30/1.31, or on a break of 1.3250, looking for a run towards 1.3700. What will make this come about I am not quite sure. Given that I am bearish on the Eur/Usd, if the cross were to be at 1.3700, and Euro/Usd, at say 1.25, the Aud would need to be at 0.9125!..Maybe we are in for the major move south in the Aud as outlined above...who knows? It is worth keeping an eye on though, as the Aud is suddenly looking very dodgy and not just against the US Dollar.
GBPAUD 1.5585. Sterling is breaking higher and I suspect that it is looking good for a move towards major resistance at around 1.5900. Friday saw it fall just 15 points short of our 1.5675 initial objective but if/when that is taken out we should be on our way higher. In the meantime, any dip towards 1.5400 looks like a good buying opportunity. The dailies remain very overbought though so it maybe that we need to consolidate in the 1.5400/1.5700 range for a while to allow the these to unwind before we can find the legs for the eventual move higher.
Economic data highlights will include:
M:
T: RBA Minutes
W: WBC Consumer Confidence
T: CB Leading Indicator, HSBC Mfg FlashPMI
