An underlying bid tone in the US$ gradually gathered pace through the session, leaving most of the counterpart currencies at or near trend lows and looking as though there may be more of the same ahead. Direction today will come partly from the global services/composite PMI’s, where China will kick things off in Asia, although the market will focus increasingly on tomorrows ECB meeting and on Friday’s NFP. Australia sees the Q3 GDP today, while later on we get the EU Retail Sales, US ADP Employment and the ISM Non-Mfg PMI and Beige Book.
After some choppy trade following the RBA announcement yesterday, which took the Aud up to 0.8542, it has since reversed and headed lower after traders took a closer look at the wording of the statement.
The RBA increased its emphasis on the desire for a lower Aud after leaving rates unchanged at 2.5%, signalling that a long period of stable rates is likely. The reversal of yesterday’s rally in commodity prices did the Aud no good either, helping to push it lower ahead of today’s Q3 GDP (exp 0.7%qq, 3.1%yy) and Chinas Services PMI’s
The Aud is sitting above the session low of 0.8332, which in turn comes ahead of Monday’s 0.8416 low. If the data is soft, expect a quick test of 0.8400, a break of which would potentially see a steeper acceleration towards the June 2010 low at 0.8315 and then to the May 2010 lows at 0.8066. As I said before, I think we are eventually heading a fair bit lower than that (see long term outlook from update of Nov 24) and still look for 0.6000, albeit a couple of years down the track. A monthly close back above the neckline, now at 0.8800 would invalidate that view, although this is beginning to look increasingly distant. We shall see.
If today's data looks a bit more positive, we could get a run back towards minor resistance at 0.8460, above which would run on towards 0.8500 (100 HMA; 0.8505) and then to test the descending trend resistance, currently at 0.8515. Beyond here, which looks unlikely, could see a run towards 0.8550.
The overall theme of trading from the short side and leaving room to sell into rallies remains in place. Today will depend on the data, but overall, look for a range of 0.8380/0.8480.
Economic data highlights will include:
AIG Performance of Services Index, Q3 GDP, China Official/HSBC Non Mfg PMI.
Jim Langlands
FX Charts
www.fxchartsdaily.com
