The dollar's inexorable rise continued after the release of the strong US Jobs data with the market now eyeing a rate rise from the Fed, sooner rather than later. Most currencies are at multi-year lows against the dollar and it looks as though there is more of the same on the way. The week ahead has a fair bit of data due, starting with the German IP and the EU Sentix Investor Confidence Survey today, both of which could well put further pressure on the Euro. The focus in Asia will be on the Q3 Japanese GDP and on the November Chinese trade data.
The Aud is opening lower in early interbank trading, so far seeing a low of 0.8288, on the back of some weekend headlines highlighting the government backed review of financial industry calling for higher capital ratios at big Australian banks.
The Aud finally reached a long term target on Friday at 0.8315 (June 2010 low at 0.8315) and while this level is still intact, there would appear to be plenty of room left in this move lower, which I think will eventually take us a long way below 0.8000. Today's focus will come from the Chinese Trade data (Exp 43.5bio. Exports +8.2bio, Imports +3.9bio).
With more banks joining in the call for a 2015 rate cut from the RBA, it seems only a matter of time before we break below 0.8300, where the next major target would not be seen until the May 2010 lows at 0.8066, with very little in between. As I have been harping on about for the last couple of months, I think we are eventually heading a fair bit lower than 0.8000 (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.
On the topside, 0.8350 will be minor resistance above which could head back to 0.8380 and then to 0.8400 although this looks doubtful in the short term.
Above, 0.8400 (100 HMA) would see sellers ahead at last Thursday's 0.8428 high, which ties in with Fibo resistance at 0.8425(23.6% of 0.8795/0.8355). The descending trend resistance, currently at around 0.8445 and the 200 HMA/Daily Tenkan at 0.0.8465 would also provide resistance although I cannot see them coming under pressure. If wrong, look to sell into the strength with a SL placed above 0.0.8480. Note that we are falling increasingly quickly away from the monthly cloud at 0.8540 and I would be very doubtful now of heading back into it.
Economic data highlights will include:
M: China Trade Balance
W: WBC Consumer Confidence, Australian Home Loans, Home Loan Investment Lending, China CPI, PPI, New Loans
F: China Industrial Production, Retail Sales, Urban Investment.
Jim LanglandsFX Charts www.fxchartsdaily.com
