Trading company SEB have suggest to clients to get short AUD/USD. They report “the RBA left its cash rate unchanged at today’s meeting. However, the statement gives a clear signal more rate cuts should come. The AUD appreciated following the decision as a rate cut was widely expected. Use this uptick as an opportunity to short the AUD/USD”.
Sell AUD/USD at 0.7810 targeting 0.73, stop loss on daily close above 0.7930.
SwissQuote report that “given the potential headwinds on the Australian economy, we suspect that the RBA will downgrade its inflation outlook and remove its neutral rate bias during its February meeting. Such revisions would strongly hint for a rate cut in March in order to protect the economic recovery and further weigh on the Australian dollar. However, the RBA could be less patient as mentioned by a close RBA watcher, which had some reliable
sources from RBA’s senior staff in the past. Even if the RBA has to respect a media “black-out” in the week before policy meeting, AUD/USD made new lows on the news”.
Capital Trust Markets reports “the Aussie dollar has shown a lot of resiliency against most major currencies recently, raising the case of more upside in pairs like AUDUSD and AUDJPY.
There are a couple of important trend line formed on the 4 hour chart of the AUDJPY pair, which are likely to act as a support for the pair moving ahead. The pair recently climbed towards 102.80 area where it found sellers, and is currently trading lower. There is a chance that the pair might spike lower towards the first bullish trend line, which is also sitting around the 23.6% Fibonacci retracement level of the last leg from the 98.05 low to 102.83 high. Moreover, there is one more bullish trend line, connecting lows sitting just below the first trend line. So, there is a lot of support around the 101.80-60 area where buyers are likely to take a stand. If the pair continues to trade higher from the current or lower levels, then initial hurdle is around the last swing high of 102.83, followed by the all-important 103.00 area.
On the other hand, if the AUDJPY pair breaks the highlighted support zone, then it is likely to head towards the 100 simple moving average (SMA) – 4H, which is around the 50% fib retracement level.
There is no major release in Australia in the coming sessions, but in Japan the BOJ monetary policy meeting minutes will be released during the next Asian session. We need to see how the Yen pairs react after the release. Overall, buying dips is a good idea in AUDJPY moving ahead”.
Capital Trust Markets reports “recent market sentiment suggests that the AUDUSD pair might head lower in the near term as the US dollar might gain traction moving ahead.
There was a monster trend line on the 4 hour chart of the AUDUSD pair, which was breached earlier during the Asian session. The most important point to note from the charts is the fact that the pair is now trading below all three key simple moving averages (100, 200 and 50). This might add pressure on the Aussie dollar buyers. Currently, the pair is trading around the 50% Fibonacci retracement level of the last leg from the 0.8540 low to 0.8795 high. So, there is a chance of a correction in the near term towards the broken support area which might act as a resistance now. Immediate resistance is around the 50 SMA, followed by the 100 SMA. The 4H RSI is well below the 50 level, which could encourage the Aussie sellers to take the pair lower moving ahead.
On the downside, initial support can be seen around the 0.8600 area. A break and close below the mentioned area might call for a move towards the 0.8550 level”.
Shortly after the markets close in the US on Monday evening, the latest monetary policy meeting minutes will be reported out of Australia.
Capital Trust Markets reports “the meetings come at a time when markets are looking at the Australian property sector very closely in order to gain insight into whether the house prices and construction activity will continue to expand into 2015, or whether the current deceleration of those aforementioned will lead to a halting and eventual decline. This scrutiny surrounding the Australian economy means that any bias inferred by the monetary policy meeting minutes as far as possible interest rate policy is concerned could impact the value of the Australian dollar versus its major counterparts during the Asian session. With this in mind, what of the minutes likely to show and what are the levels to keep an eye on as we head into the release? Let’s take a look.
First, let’s look at the minutes. The likely outcome of the release will be that Australia’s monetary policy committee will hold interest rates low for the foreseeable future. The property market is expanding, but inflation remains low and wages – and in turn – retail activity are showing very little movement month on month. Through keeping interest rates at lows as we head into the end of the year and throughout the beginning of 2015, the reserve bank of Australia (RBA) hopes it will be able to stimulate Australian households into engaging in consumer activity. So what are the levels to keep an eye on as we head into the release? Take a look at the chart below.
Action earlier today saw the AUD USD into the open of the Asian session, but at the open of the European morning session the pair dipped back below its 200 SMA (H4) to validate 0.8595 and 0.8761 as in term support and resistance respectively. These are the levels to keep an eye on. If we get a hawkish tone to the meeting minutes – unlikely – we could see a break back above the 200 SMA and the turning of the overall trend to the upside. Such a situation would validate 0.8910 longer-term. However, if we get a dovish tone the bearish momentum is likely to continue – a situation in which 0.8595 would serve as an initial downside target”.
BNP Paribas recommend to client to take a short EURAUD trade. They report “we see opportunity to short EUR vs high yielders amid a positive risk-taking environment. AUD is resilient to falling commodity prices and our positioning
indicator suggests further scope for EURAUD shorts.
We initiate a short EURAUD trade recommendation at 1.4260 targeting 1.3805 with a stop loss at 1.4490.
We expect EURAUD to trade lower during periods of improving risk appetite. While the Fed’s QE3 progamme has now officially come to a close, we expect increasingly aggressive easing programmes from the ECB and BoJ to provide
offsetting support for markets. Combined monetary base growth for the major central banks is likely to continue through 2015. We continue to favour long positions in risk-sensitive currencies funded in EUR and JPY and are now initiating a short EURAUD trade recommendation at 1.4260 targeting 1.3805 with a stop loss at 1.4490″.
ANZ report “the BoE was unambiguously more dovish in its November Quarterly Inflation Report. There was a notable downgrade in the bank’s inflation forecast and softening in the outlook for GDP growth.
• Wages are responding to the employment gains of the past year or so as spare capacity shrinks. In part due to its weaker inflation outlook, the BoE looks for real annual earnings growth of around 2% by the end of 2015.
• In such a subdued environment for inflation, it is difficult for the BoE to justify a normalisation in policy rates in the near term. Prospects for a H1 2015 rise in the bank rate have been reduced. This is negative for sterling near term and will act as a constraint on GBP vs USD, AUD and NZD”.
A few hours after the markets close in the US on Monday, the latest house price index and NAB business confidence data will come out of Australia.
Capital Trust Markets reports “both releases are effective headliners, and a surprise in either could catalyze considerable volatility in the value of the Australian dollar versus its major counterparts. However, at present, the house price index is likely to have the most impact. Why? Because the property sector is considered fundamentally overvalued at present in Australia, and markets are looking for signs that either a – that this overvaluation is justified or b – that there is enough retail and consumer demands to support it. With this in mind, what are the levels to keep an eye on as we head into the release, and how can we profit from anything unexpected on either side of the consensus forecast? Here is what you need to know.
So, what’s going on in Australia at present? Well, there are two sides to the coin. The Chinese economy has cooled considerably this year, which has translated to a decline in mining sector output in Australia. This – in turn – has led to a decrease in employment across the sector – which accounts for a large proportion of Australian GDP. In response, the Australian government has held interest rates at record lows in order to boost the property market and shift some of the nation’s reliance on mining towards this sector. It worked, and now house prices are at levels that some call a bubble. However, other areas of the Australian economy are not as advanced as the real estate market. Employment is relatively low, and some are suggesting that a large shift of baby boomers towards retirement could put further pressure on Australia’s ability to maintain sustainable growth. For this reason, markets will be looking for strong housing data to suggest that the property sector can maintain its buoyancy while the rest of the economy catches up. If it doesn’t, and we see a sharp decline in house prices amid a relatively unstable fundamental economy, we could see some serious weakness in the Australian dollar. So what are the levels to keep an eye on? Take a look at the chart below.
As is so often the case in the markets, the levels we have been watching for a few weeks remain the relevant levels in the AUD USD as we head into the upcoming release. 0.8595 and 0.8761 of levels to keep an eye on. Consensus forecasts the house price index figure to show a 1.6% increase in prices – a small decline on the previous release of 1.8%. If we get anything above this, despite the fact that it would maintain that house prices are growing unsustainably, markets will likely see this as a positive thing for the Australian dollar. With this in mind, look for anything above 1.6% to validate aforementioned in term resistance as an initial upside target, with October highs at 0.8910 the level to watch if we get a close above resistance. Conversely, weak data would bring 0.8595 into play, with a break below this level validating 0.8552 medium-term”.
JP Morgan suggest to clients to go short AUDUSD, they report “commodity currencies extended their slide in tandem
with commodity prices this week. Brent has taken the brunt of it, but the move lower in commodities has been
relatively broad-based with iron ore, coal and gold all declining, and only livestock and agriculture faring better. Next week, a key event risk for commodity currencies is the monthly China data release. Our economists expect a month of stability, but notably, their forecasts for FAI, retail sales, IP and CPI are all below consensus. While there are considerable errors around these forecasts, our bias is to trade commodity FX from the bearish side, especially given that most of them appear too expensive relative to terms of trade. AUD stands out in this regard: its largest commodity exports are iron ore, coal and gold and all three have been hit hard recently, resulting in a material decline in its commodity index (chart 4), it appears rich on our short term fair value models and spec shorts are not yet that extreme in AUD (as they are in other commodity currencies such as RUB, BRL and NZD).
CBA forecast AUDUSD to fall over the next 12 months, they reason -
Strong demand for the USD vis-à-vis the JPY and EUR will continue to lower AUD/USD. AUD cannot remain immune.
However, Australia’s terms of trade are also falling as commodity prices, particularly the iron ore price, declines.
Australia’s two-year bond yield is below the RBA’s cash rate and the Australia-US two-year bond spread is narrowing.
A firmer USD, declining commodity prices and narrowing Australia-US yield spreads will further guide AUD/USD lower.
While the Australian trade-weighted index is holding up much better, it too risks edging lower on the above factors.
Our forecast for AUD/USD depreciation next year is occurring earlier than anticipated. The USD is not correcting lower.
Our current AUD/USD forecasts are tabled below. They have the AUD declining to 0.8500 in September 2015. While the AUD typically undertakes a 20.5% annual trading range (it has averaged this every year since the currency floated in December 1983), the forecasts provide guidance of the likely medium-term direction. We are forecasting the AUD lower. But the speed of the decline has been aided by the current USD bid in the market vis-à-vis the JPY and EUR. The rapidly declining Australian terms of trade and the downward pressure on the Aus-US interest rate spreads have only added to the depreciation pressure on the AUD being brought forward”.
Following two failures to overcome the resistance at 1.1300, Capital Trust Markets reports “traders have now turned their attention towards the support at 1.1200.
While recent price action indicated a strong bullish momentum buildup for AUD/NZD, the pair has been trading within a very large range since late July, with significant boundaries located at 1.1300 (resistance) and 1.0925 (support). Spot is currently trading around 1.1225, down for a second consecutive day. Sellers will most likely take another shot at 1.1200 tonight, with a successful break potentially paving the road for more losses.
A dip below 1.2000 will invalidate last week’s Higher Low and a four day range, triggering a cluster of stop losses accumulated from long positions. This should push AUD/NZD lower, at a minimum down to 1.1100/37 (large price pivot area strengthened by 200 Simple Moving Average on 4H and 50-Day SMA). Stochastic is turning lower from overbought territory on Daily, confirming a potential top followed by a correction lower. Even lower and traders will set their targets on 1.1000 support trendline and potentially a large crossroad for the long-term technical landscape.
Based on the rejection off the resistance at 1.1300, the uptrend will only be reactivated on a clean break and daily close above this level”.
After the markets close in the US on Monday evening, Capital Trust Markets reports “we will get a raft of key fundamental releases out of Australia followed by the Reserve Bank of Australia’s (RBA) latest interest rate decision.
With such a degree of importance coming in as a short span of time, we could see considerable volatility in the value of the Australian dollar versus its major counterparts. Add to the mix that global markets are keeping a keen eye on the cooling of the Chinese economy in order to gain insight into whether such cooling is likely to put pressure on the Australian economy, and we have something of a perfect storm in the event of anything unexpected this evening. With this in mind, what of levels to keep an eye on in the AUD USD, and how can we draw profit from a release either side of the forecast? Here’s what you need to know.
Exports, imports, retail sales and trade balance data are all scheduled for release, coming three hours before the interest rate decision. Of those scheduled, the retail sales figure is likely to be the headliner. Consensus forecasts the interest rate decision to show unchanged on the current 2.50%, making those releases before the decision the ones to watch. Take a look at the chart below.
As you can see, we have seen lots of volatility in the pair over the past couple of weeks, with range action between 0.8649 and 0.8910 dominating procedures. Action today has seen a large gap down on the H4 timeframe, with price dropping from its 200 SMA to fresh weekly lows at 0.8703. The levels to keep an eye on as we head into the release are in term support at the aforementioned 0.8703, and resistance at 0.8850. Consensus forecasts the retail sales data to show a 0.4% increase on a month over month basis for September, and a 0.5% increase for Q3. Anything above these figures would likely close the downside gap in the Aussie, and validate aforementioned in term resistance at 0.8850 as an initial upside target. Conversely, weak data would compound the current bearish momentum and likely catalyze a break below 0.8703. Such a scenario would validate 0.8649 longer-term”.
Capital Trust Markets reports “GBP/AUD is trading 170 pips higher than its Friday Close, putting a 5-week bearish channel at risk, with no immediate signs that buyers will step down from this rally.
In less than two days with above average bullish momentum, GBP/AUD has successfully retraced nearly all losses sustained throughout the previous two weeks of trading. After trending lower for at a steady, albeit choppy pace, this pair went through a couple of bamboozling swings between 29th and 31st October. Plenty of offers located at 1.8100 lifted price higher on Wednesday, only to retrace lower immediately in order to fake a bearish breakout.
Today’s gap, followed by a sustained intraday rally, broke above an intermediary resistance trend and the most recent Lower High set at 1.8258, changing GBP/AUD bias to bullish. Spot is currently trading around 1.8350 during 3rd/11 U.S. session, just above the 200 Simple Moving Average on 4H chart. A successful break above 1.8400 will lead to an invalidation of a 5-week bearish channel, which should pave the way for more gains towards 1.8525, possibly as high as 1.8682 (1st October top).
On the other hand, if bears manage to assume control in this area, which could happen only if certain AUD fundamental triggers appear, price will re-test 1.8240/50 within the next few trading sessions”.
Shortly after the markets close in the US on Wednesday evening, property market data is scheduled to be released out of Australia.
Capital Trust Markets reports “the data will offer insight into the nation’s property market. The Australian dollar is relatively weak compared to the majority of its counterparts at present, and this is boosting the economy for the time being, but many leading economists suggest that this cannot persist and we may see some decline in the near future. One of the key components of Australia’s growth over the past two years has been the property market, and the upcoming HIA new home sales figure will reveal whether this sector remains buoyant, or whether we could see signs of trouble. So, with this in mind, what are the levels to keep an eye on as we head into the release – and how can we draw profit from anything unexpected? Here’s what you need to know.
First, what are the likely factors that will drive the bias inferred by the release? Well, the answer mainly lies in Australia’s relationship with China. Australia is heavily reliant on Chinese demand for its natural resource exports. Over the past six months or so, the Chinese economy is cooling and this demand has weakened. In response, the Australian government has attempted to rebalance its economy by shifting dependency from its mining sector to the housing market. This has been achieved by keeping interest rates low. Looking longer-term, the Australian property market seems to be in something of a bubble, with house prices in major cities rising more than 15% year-to-date, and across the nation more than 10%. This could lead to a potential bursting when the reserve bank of Australia (RBA) decides to raise rates, but as mentioned, this is more the long-term prospects. Short-term, markets will be looking for strong new home sales data to suggest the Australian economy is waning and that we could get aforementioned interest rate hike near-term. So what are the levels to keep an eye on in the Aussie? Take a look at the chart below.
As the chart shows, we’ve seen considerable volatility in the AUD USD as late. Recent range action was broken earlier this week and we are now trading above the 200 SMA on the four hour chart with in term support at 0.8815 and resistance at 0.8896. These are the levels to keep an eye on as we head into the release. While there is no forecast released for the figure, we can use its inference to form a bias. What I mean by this is that if we get a positive figure, i.e. anything above 0.0%, this can be taken as positive for the Australian dollar. In such a scenario, look for a break above 0.8896 to validate 0.8989 to the upside longer-term. Conversely, look for a negative figure to catalyze a break towards aforementioned in term support, with a close below this level bringing 0.8728 into play longer-term”.
Capital Trust Markets reports “after a couple of soft releases on Monday, U.S. Dollar bulls found themselves in dire need of positive data today. Unfortunately for them, Durable Goods decreased again this month, pushing the greenback lower against all major counterparts.
After four long weeks of choppy price action behavior within an increasingly tighter range, Aussie appears ready to correct some of the losses incurred throughout September against the U.S. Dollar. Today’s rally broke above several lower highs formed in October, triggering a stop avalanche as AUD/USD short positions were shaken out of the market.
Spot is currently trading around 0.8865 as the 28th/10 European trading session draws to an end. Since AUD/USD is above 200 Simple Moving Average on 4H timeframe, traders will now systematically target the largest resistance levels in this area. First resistance is located close by at 0.8890 – 0.8900, marked by 9thOctober high and a proven pivot zone. If price breaks above this line, round psychological level of 0.9000 will follow soon afterwards.
The preferred strategy is to buy dips and bullish breakouts above resistance levels, as AUD/USD should maintain a bullish swing configuration of Higher Highs and Higher Lows for the time being. Immediate dips should be capped at 0.8820/30, where stop losses from long positions are likely to begin accumulating”.
EUR/AUD selling pressure remains high even as the trading week is about to end. Capital Trust Markets reports “since bears are reluctant to take profit, we might see a deeper decline early next week on a break below support.
Despite a significant bullish spike in the early hours of Asian trading, sellers were quick to bring EUR/AUD back in line. The pair is once again trading just above the 100-Day Simple Moving Average, priced at 1.4372, a level strengthened by 38.2% Fibonacci retracement calculated between 5th September Low at 1.3798 and last week High of 1.4704. Since price action is currently stuck between all the large moving averages, we could see a prolonged consolidation in this area or a break lower to re-test old support levels.
With spot currently trading around 1.4387, EUR/CAD is showing a large bearish engulfing bar on Daily. Stochastic shows increasing weakness with plenty of room to spare until oversold territory is reached. A break below 1.4358 will immediately expose 1.4300/10, where 50-Day Simple Moving Average and October’s low must be broken in order to form a Lower Low and completely change the technical landscape to bearish. Medium-term targets follow at 1.4251 and 1.4144; however a short retracement is likely to materialize before the second level is reached.
Stop losses from short positions will begin to accumulate above today’s high at 1.4512, making a break above this level an instant invalidation of our bearish scenario”.
JP Morgan suggest to clients to get short AUDJPY. They report “many factors make AUD vulnerable to additional
declines: rich valuations, sensitivity to global growth concerns through lower commodity prices as well higher
volatility, and finally the upcoming CPI report. The market has already taken down its expectations for inflation and is looking for a benign outcome for 3Q given the repeal of the carbon tax but J.P. Morgan forecasts (0.3%q/q for headline, 0.4% for the core) are still below that of the market (0.4% for the headline and 0.55% for the core). If our forecast is realized, it would leave 6M annualized rates of headline and core inflation around the bottom of the RBA’s target band and would reinforce the idea that risks are biased towards more disinflation in Australia than currently forecast by the RBA. Finally, RBA minutes to be released next week should also be interesting as they will focus on RBA’s shifting narrative on China. By contrast, JPY will be the only currency that is insulated against a further decline in oil prices and will benefit if vol increases further.