AUD/USD: 0.8666EUR/USD: 1.2380All was quiet heading into the weekend until Mario Draghi reiterated that the ECB will do everything within its powers to ignite growth/inflation expectations, sending the Euro tumbling sharply lower and with more losses looking likely this week. Draghi was closely followed by a Chinese rate cut from the PBOC, which did not help the Euro at all, but sent equities sharply higher as well as, briefly, the commodity bloc. This week will look to a heavy raft of EU and US data, beginning today with the German IFO, the US Markit Flash Services/Composite PMI's and the Dallas Fed Mfg Survey. Japan holiday. NZ Inflation Expectations coming up
The Aud rallied sharply from 0.8625 to 0.8722 on the news of the Chinese rate cut, although the move higher was rather short lived and the Aud then came under pressure from selling through the AudYen cross, to finish the week back at 0.8665.
As with the Kiwi, the immediate picture for the commodity based currencies currently looks a bit cloudy, although the shorter term charts do hint that we could see another test of the higher ground in the coming sessions. There is not much data out to drive the Aud this week so it will be offshore events that will dictate the direction and if the US$ maintains its run higher then the Aud is going to find it hard to make too much headway on the topside.
If we can head higher, Monday will see minor sellers once more at 0.8685 (200 HMA) and again at 0.8700, ahead of Friday's top at 0.8720. I don’t really see us getting up here today, but further strength would then lead the Aud towards 0.8740 and possibly to last week’s high at 0.8795.
The downside support will initially be here at 0.8660 (100 HMA) below which would head towards Friday's low at 0.8604. Below there will find bids once more in the 0.8590/00 area, a break of which would revisit 0.8565 although this looks a little unlikely in the short term.
Further out as we said previously, the major support is seen at the 7 Nov low at 0.8540 and this will provide very strong support, being both the 50% pivot 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:
T: China CB Leading Economic Index
W: Australian Construction Work Done
T: New Home sales, Private Capital Expenditure
F: private Sector Credit.
Jim LanglandsFX Charts www.fxchartsdaily.com
