AUD/USD: 0.8790EUR/USD: 1.2750The US$ soared again today, while the commodity bloc and the equity markets took a big hit as risk sentiment was re-assessed causing some rare demand for the Yen. The trend looks as though it has plenty of legs, with the Euro, Chf, Aud and Nzd all making new trend lows and showing little sign of any significant bounce. Today's action will be derived, in Asia from the Japanese CPI, and later, from the German Consumer Confidence, which is unlikely to assist the Euro, and then from the US GDP, with another solid reading likely to spur the continuation of the dollars uptrend.
In following the Kiwi lower, Europe took the Aud down to 0.8790 before a bounce into early NY, but the heavy equity markets and the souring risk sentiment saw the Aud head down to 0.8773 and then bouncing a little late in the day to finish at 0.8785, virtually at the target mentioned previously, at the 1.618 Fibo extension of the head/shoulder target at 0.8790.
Having trade to 0.8773, the Aud has touched the major rising trend support off the July 2007 low at 0.7721, at 0.8775 (weekly chart below - purple line) and this could well hold it today as it should be strong support. Eventually though it looks as though we are going to want to retest the January low at 0.8660, but that will take a while.
If 0.8775 does get taken out, then a case can be made for a very much deeper fall in the Aud, for a potential multi year decline back towards the 2008 low at 0.6000 and although I cannot really see it at this stage it is worth noting. In the meantime, a break of 0.8775 would suggest a run towards 0.8660 below which the base of the monthly cloud is at 0.8540 and the base of the major channel is at around 0.8515.
On the topside, look for the chance of a squeeze back above 0.8800 towards 0.8830 and possibly to the 100 HMA at 0.8865, but which if seen would be another sell opportunity.
Keep an eye on the equity markets. If they take another dive and sour risk further, the Aud is going to remain under heavy pressure.
Stay short. Sell rallies
Economic data highlights will include:
China Leading Index.
Jim LanglandsFX Charts www.fxchartsdaily.com
