AUD/USD: 0.8760EUR/USD: 1.2530Despite some solid US data on Friday the US$ saw a sharp reversal against the Euro and the commodity bloc, while Cable and the Yen also remained on the defensive. Gold, Silver and Oil all saw sharp rallies. This week will look to the FOMC Minutes for guidance towards the thinking of the Fed, but there is plenty else besides, beginning today with the Japanese GDP, and later, a speech from Mario Draghi. The US sees the Oct Industrial Production & Capacity Utilisation. Before then, NZ gets the Q3 Retail Sales & Australia, vehicle registrations.
After sitting close to 0.8700, the Aud dived to 0.8648 following the release of the US data on Friday, before bouncing strongly to reach 0.8773 as the US$ broadly weakened, before closing at 0.8755.
In the near term it looks as though we may be in for a larger squeeze to the topside if the nearby strong resistance (0.8760: 5 Nov high/ 0.8765 (23.6% of 0.9498/0.8540) can be overcome. The short term indicators suggest that if Friday’s spike high is taken out, then we could be in for a run towards 0.8800 and possibly to as high as 0.8865 (38.2%0.9398/0.8540). If we do see it up there, we should be looking for levels to sell it as I suspect that the larger downtrend will eventually resume albeit it looks as though it could take a while.
For the time being 0.8720/00 looks to have the Aud well underpinned. A break would head back to the 200 HMA at 0.8660 and then to Friday's session low. While I don’t think it heads back here in the next couple of days, further losses would target last week’s 0.8590 low.
Further out, nothing has changed, and I think that we should be using the strength as a longer term sell opportunity (albeit probably at higher levels closer to 0.8800) as eventually I suspect that we will head back below 0.8600, below which would see a run towards 0.8570 and then possibly to last week’s low at 0.8540. As we said before, this will provide very strong support, being both 50% of the move from 0.6006/1.1082 and also the base of the monthly cloud. A break of this level though, and a November close below it, would have very bearish implications, for a test of the major channel base at around 0.8474 and then the May 2010 lows at 0.8066.
Economic data highlights will include:
M: China FDI, Australia New Car sales
T: WBC Leading Index, CB Leading Indicator, House Price Index
Jim LanglandsFX Charts www.fxchartsdaily.com
