AUD/USD: 0.8805EUR/USD: 1.2680Friday finished a generally choppy session; with much of the focus on the US equities markets again as they headed higher, as risk sentiment continues to recover from the recent sell-off. This theme may continue after the weekend EU bank stress tests came in pretty much as expected. There is plenty of data out in the next few days, starting today with the German IFO and some secondary US data. This comes ahead of the US Durable Goods, tomorrow, the FOMC meeting, Wednesday, and the US GDP Thursday. Elsewhere, the RBNZ I/R decision and German Unemployment., both Thursday, and the provisional EU CPI (Friday) will be in focus.
The Aud is opening higher in early NZ trade following the weekend stress tests that have come in in line with expectations, giving some relief to risk sentiment. The Aud is currently at 0.8805, in very thin conditions, having briefly been up to 0.8820.
After breaking down to a low of 0.8718 in Asia on Friday, short covering then set in and slowly squeezed the Aud higher through the session to reach 0.8823 (daily Kijun) at the NY open, after which a slow drift lower set in for the Aud to close back at familiar levels, seen regularly last week at around 0.8785.
More choppy trade looks to be the most likely outcome early in the week and I would not be looking for too much of any sort of directionally move, possibly until the FOMC result on Thursday. In the meantime, using the daily Tenkan (0.8765) as a pivot seems to have been a useful strategy recently, which may continue to be the case over the next day or so.
The Aud currently appears to be trading in a symmetrical triangle formation, the parameters of which were seen on Friday, so going with a break of either side would seem to be the plan, and it would appear that by the look of the short term indicators that it could be the topside that eventually comes under pressure. A break of 0.8820/25 would see a squeeze on towards 0.8842 (23.6% of 0.9502/0.8642) and then to 0.8860 (15 Oct high) and possibly to 0.8898 (9 Sept high). If seen I think it would present a better sell opportunity ahead of an eventual return to lower levels.
The downside will find buyers again at the various levels from 0.8720 to 0.8760. I don’t really see it getting much below 0.8750 today, but if wrong and we do head lower, Friday’s 0.8720 base should easily hold. If that turns out to be incorrect, then look for a run down to 0.8700 and then to the recent lows at 0.8685, 0.8675 and below there to 0.8651.
Economic data highlights will include:
T: HIA New Home Sales
F: PPI, Private Sector Credit.
Jim LanglandsFX Charts www.fxchartsdaily.com
