AUD/USD: 0.8840EUR/USD: 1.2850It was a volatile session today but finished with the commodity bloc and equities again taking the biggest hit. The Aud & Kiwi are at new trend lows, and the US equity market looks increasingly as though it has made a medium/long term top. The dollar saw some early losses although these have been mostly regained, while the Euro chopped around but went nowhere but it may feel some downside pressure if today's German IFO is another weak reading. Elsewhere the main interest will be in the NZ Trade data and in the Fonterra Milk results. Later on sees US housing data.
The EurUsd is pretty much unchanged at the end of today's NY session, having earlier squeezed up to 1.2900 after ignoring the softer manufacturing/services EU PMI’s, before turning lower once again as a cautious tone set in on the news of the US air strikes in Syria.
The market will now turn its focus to today’s German IFO release (Business Climate: exp 105.7), with a soft reading likely see the Euro head lower for another attempt on 1.2800. There are large 1.2850 expiries today which may keep the Euro on a tight range but if 1.2800 is taken out before then, we could begin to head lower towards the 1.2750 target.
For the coming session, minor support will be seen at 1.2840 and then again at 1.2810. If we do break 1.2800 we could then be in for a run towards the target area of 1.2780 (61.8% of 1.2041/1.3995) which comes just ahead of the major rising trend support from July 2001 at 1.2760 and the 9 July 2013 low at 1.2754. The daily charts are reaching oversold levels and so the downside momentum should begin to slow here, but I don’t think it is going to turn around much and once the charts have had the time to unwind, which may take a few days, I suspect that we are in for a run towards the November 2012 low at 1.2660 and then 1.2500 (76.4%of 1.2041/1.3995). Below here we then look likely to ratchet our way lower towards the 22 July low at 1.2041.
On the topside, sellers will again be seen at 1.2865 (100 HMA) and then at the strong resistance at 1.2900 (200 HMA/descending trend line). A break would trigger stops and could take the Euro higher, towards 1.2950 and possibly to 1.3000, although I don’t really see it happening.
I suspect we are in for another 1.28/1.29 range but still prefer to play it from the short side looking for an eventual break of 1.2800
Economic data highlights will include:
German IFO (Business Climate/Expectations), US New Home sales
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The Aud saw Europe make a run up to a session high of 0.8926, on the back of the improved China data yesterday, but that was as good as it got, and soft commodity/equity prices saw the Aud turn down again in NY, where it is finishing the session just above the 0.8830 low.
The Aud still looks to be in dire straits and is now in the process of breaking away from the major Fibo support at (76.4% of 0.8660/0.9505) 0.8860, which will now act as the immediate resistance.
The dailies are becoming oversold, but show no sign of halting the slide, where, below 0.8830, the next support will be seen at 0.8800 and at the 1.618 Fibo extension of the head/shoulder target at 0.8790. Eventually it looks as though we are going to want to retest the January low at 0.8660 but that will take a while.
On the topside, back above 0.8860 will find sellers at the steep descending trend resistance at 0.8890, beyond which would see another run to 0.8930, albeit that it looks doubtful to be seen today.
The 4 hour charts are showing some bullish divergence, so I suspect that for the coming session, buying dips at or below the session low (0.8830) and looking to unload them or to get short at around 0.8875 may be the plan. Medium term plan remains trade from the short side and to sell rallies.
Economic data highlights will include:
CB Leading Indicator, Financial Stability Review.
Jim LanglandsFX Charts www.fxchartsdaily.com
