AUD/USD: 0.8435EUR/USD: 1.2460Oil was again in focus on Friday, collapsing once more and taking the equities markets with it. Bond yields headed lower too, undermining the dollar which looks to be under some pressure heading into the FOMC on Wednesday where a dovish outlook from Janet Yellen would put the cat amongst the pigeons, likely causing a decent cleanout of dollar long positions before Christmas. Other data this week will include the EU & US CPI's, the ZEW, the IFO and the global flash PMI's. Today sees the Japanese Tankan, Australian MYEFO and then later, the US CU& IP and the NY Empire State Mfg Index. Liquidity is getting thin so expect some exaggerated moves. The resounding w/e Abe election win in Japan has had little effect so far on US$Jpy.
The Aus was contained within the recent 0.8225/0.8300 range on Friday, driven by external factors in the absence of any local data. This could continue to be the case as we head towards Christmas, although today’s MYEFO statement could well keep the pressure on the downside.
The Treasurer is due to announce in increase in the budget deficit to about $40 bio, on the back of the worsening terms of trade, due largely to the collapse in the iron price. The announcement will do the currency no good and the Aud is already opening the week 20 points lower than Friday’s close. See the link to the SMH, below, on exactly what to expect from Joe Hockey today.
The rest of the week provides little to go on, with only the RBA minutes and a speech from the RBA’s Debelle due this week, neither of which are expected to cause any surprises, and the most likely cause of any volatility will be the Feds FOMC meeting (early Thursday).
On the topside, the immediate points to watch today are at 0.8285 (100 HMA) and then at 0.8300. Above there would take another run at the descending trend resistance now at 0.8325 which is backed up by the 200 HMA at 0.8330. If this gets taken out, then look for acceleration higher towards last week’s peak at 0.8375, where the daily Tenkan now lies, but beyond which would take a run towards 0.8400.
Beyond there, which currently looks doubtful, would see a run towards the Fibo resistance at 0.8435(38.2% of 0.8795/0.8214). If so I would be looking to sell into the strength with a SL placed above 0.8510.
On the downside, look for a run towards 0.8200 and below there, a possible acceleration to the downside, with a wave equality target at 0.8145 (AB=CD; from 0.9398 to 0.8642, from 0.8901;see daily chart, below) being the first realistic support, beneath which there is little to hold the Aud up until the May 2010 lows at 0.8066.
Jim LanglandsFX Charts www.fxchartsdaily.com
