AUD/USD: 0.8915EUR/USD: 1.3280The Aud remains under severe pressure and virtually touched the long term target on Friday after some highly volatile trade either side of the NFP, when it spiked up to 0.8970 and then equally quickly towards the base of the weekly channel at 0.8860 (low 0.8869). With both longs and shorts ducking for cover, the Aud then had a choppy finish, but regained a little ground into the close, closing just above 0.8900.
There is plenty of data out in the coming week though, led by the RBA Rate decision on Tuesday and the Jobs data on Thursday, not to mention a whole raft of Chinese figures on Friday, and further pressure therefore looks likely to be placed on the downside. Below 0.8850 would head for a look at the 0.8770 target (August 2010 low) and possibly down towards 0.8530 (50% pivot of 0.6002/1.1082).
Bounces could take us back to minor Fibo resistance at 0.8970, and then to 0.9000 where the sellers will now be keen, and above there a further squeeze could take us on to 0.9030 (38.2% of 0.9295/0.8870) and potentially on to 0.9080 (50%) and 0.9130 (61.8%) although this is currently over the horizon. There is scope on Monday for a bit of a rally, given that the hourly charts are showing some bullish divergence, but I would not become too carried away on the topside ahead of Tuesdays RBA outcome.
The banks are closed today, so liquidity may be a little thin and we now have 5 weeks of electioneering from Rudd and Abott to look forward to which will bore us all rigid. While this is unlikely to have any immediate effect on the Aud, once the election is out of the way, on Sept 7, we could see a decent rally, given that there will be more certainty of policy direction, allowing business to build confidence, which should in turn flow though to increased capital expenditure. That's the theory anyway!
GBPAUD. 1.7170. Sterling has so far pulled up just short of our long term target of the last 6 months, at 1.7225 (76.4% of 1.8140/1.4410), having reached 1.7194.on Friday. With the strong positive momentum of the longer term charts we could see a move to take this out, and on towards 1.7355 (23.6% of 2.8063/1.4380), which, if seen, should be strong. If we see it above here, don't stand in the way, as there is little hold it until 1.8140 (July 2010 high) and eventually 1.9910 (38.2% of 2.8063/1.4380)! Don't get excited, this is a long way off!!
The downside will now find bids at 1.7000 and given that the daily indicators do seem to be running out of some steam on the topside, we could see some reasonably deep corrections within the overall uptrend. I suspect the cross will remain highly volatile and below 1.7000 could easily see a drop to 1.6900, below which, the major rising trend support is not found until about 1.6650, so be patient and wait for the right levels to enter the market, but the overall momentum remains to the upside. Having virtually met the 1.7225 objective, I would currently stand aside and await the next buying opportunity, or for those brave enough, go short above 1.7200 and wait and see if we get the sharp correction lower that awaits somewhere along the line.
EURAUD: 1.4913. This cross is in a similar position to GbpAud and continued to scream higher last week, reaching and closing 1.4938, a level not seen since July 2010. It now looks capable of carrying on to 1.5210 (38.2% of 2.1145/1.1605), a break of which would potentially take a look at 1.6365 (50%). We could do with some consolidation at current levels, otherwise, if/when the cross corrects lower, it could be equally as sharp as last week's rise as there is not an awful lot of support to hold it as it appears to be trading in thin air up here and could turn out to be a bit of a spike top at least in the short term. There is currently not an awful to to hold the cross up until 1.4480 and the first Fibo support is not seen until 1.4153, so tread a bit carefully, but buying dips for a continuation of the major uptrend seems to be the way of it.
Economic data highlights will include:
M: AIG Services PMI, TD Inflation, Retail Sales, HSBC China Services PMI
T: ANZ Job Ads, Trade Balance, RBA I/R Decision
W: AIG Construction Index, Home Loans, Investment Lending
T: Unemployment, China New Loans
F: RBA MPS, China CPI, PPI, Retail Sales, Urban Investment, Industrial Production
