The coming week is going to be a busy one with plenty of event risk, – with the main focus being on the FOMC meeting but with the Scottish Referendum Vote not too far behind and which will have very severe implications should the “Yes”vote win the day – which it won’t, I don’t think. Other highlights will be the inflation data from the EU, US & UK, the latest Minutes from the RBA & BOE, an Interest rate decision from the SNB and the NZ GDP, which comes ahead of Saturday’s NZ General Election. There are plenty of other bits and pieces too, with the dollar looking likely to consolidate in the near term, prior to resuming its gains.
The Aud has opened lower, Monday, perched precariously above 0.9000 following the release of the weekend China data and it looks as though there are more losses ahead.
The Aud is in full reverse gear after falling to a new trend low at 0.9030 on Friday, with plenty of hedge funds and real money managers falling over each other in their rush for the exit, and lower levels looking likely this week.
Note that Chinese industrial output for August was released over the weekend and was the lowest outcome in over 5 years : yy +6.9% vs +8.8% exp, which won’t help the Aud or the Kiwi a lot first thing on Monday.
With a dovish tone from the RBA Minutes, tomorrow, and the chances of a more hawkish tone from the Fed on Wednesday, the way would appear to be open for further losses and a test of 0.9000 would appear imminent. Further pressure could come later in the week from the RBA Bulletin/Annual report which are again likely to lament the high level of the Aud.
Having closed the week below 0.9050 (Weekly Cloud Base, 50% pivot of 0.8660/0.9505, Monthly Tenkan) it now looks as though further declines could now take the Aud, below 0.9000 and on towards 0.8975(61.8% of 0.8660/0.9505), below which would reach the head/shoulder target that we mentioned last week at 0.8960, where the Aud should find some buyers at last. If wrong and the Aud keeps falling as the longs continue to scramble, then we could be in for a bit of a freefall towards 0.8923 (12 March low), 0.8890 (3 March low) and possibly to 0.8860 (76.4% of 0.8860/0.9505).
While the dailies are pointing sharply lower, the 4 hour charts are at oversold extremes, so we could see a short term consolidation or perhaps a rally that could take the Aud back to 0.9050, where the weekly cloud base would provide the initial resistance. Above there, 0.9070 (Hourly Kijun) will see minor sellers ahead of the 100 Month MA and the monthly Tenkan which both sit at 0.9100. I cannot really see the Aud back above here in the next session or two, but if wrong, look for a squeeze towards the 100/HMA/descending trend resistance, currently at around 0.9150.
Stay short, looking to add to positions with a SL placed above 0.9150.
Economic data highlights will include:
M: New Car Sales
T: RBA Minutes, China FDI
W: WBC Leading Index
T: China House Price Index, RBA Bulletin/Annual report
F:.
Jim LanglandsFX Charts www.fxchartsdaily.com
