A lot of focus on the AUDUSD today.
Firstly I feel this move is both technically driven and also by further USD flows, although the poor Aussie consumer confidence print would be playing into the move.
We’ve seen a break of the multi-month range (at 0.9203), with the 200-day MA subsequently breached – whether the pair can close below 0.9200 will be key here. If it does, price action has the feel that the pair could trade in a new range of 0.9000 to 0.9200. The 50% fibo retracement of the October 2013 to January 2014 sell-off at 0.9207 has also been breached.
The MACD gave us a sell signal yesterday (crossing the signal line) and the stochastic indicator is headed lower.
Fundamentally the iron ore price has mattered little of late, but we could be seeing some pay back as the local news flow has been totally negative here. Perhaps we are seeing a capitulation as everyone is bearish iron ore and rebar?
The PBOC have strengthened the RMB signifantly (282 pips) over the last two days and this could also be playing into AUD weakness. Chinese equities are down around 1%.
We also have EUR/USD and GBP/USD way oversold, while USD/JPY is overbought and traders should work bids in USD/JPY on moves back to 105.40 in my opinion. If you want to express a bullish USD view then AUD/USD offered greater risk/reward. I still think the AUD has attractive qualities though (mainly against the EUR), but the USD is simply more attractive.
Fed funds futures have moved higher in last couple of days, in line with the article from the San Fransisco Fed, while 10-year yields US bond yields are back above 2.50%. There is a growing view the Fed change is lanaguage next week and remove the ‘considerable time’ stance. There is a fair chance this plays out and the market is nervous about being caught short USD’s here.
We’ve seen good buying of AUDUSD volatilty today through options structures and this highlights a few nerves about AUD downside. This seems fair.
A move to the March double top at 0.9138 seems on the cards and rallies to 0.9200 could be a good place to re-sell if missed the move.