Aussie Yen top in

AUDUSD - still treading water

The AUDUSD remains becalmed at the moment unable to sustainably move up through the congestion zone north of 1.04. Last night the high of 1.04 was at the bottom of this range as you can see in the chart below. 
It is interesting to judge the Aussie Dollar's move, or lack thereof, in the wake of the better than expected Chinese HSBC PMI released yesterday. 

Part of the argument put forward this week by Morgan Stanley that the AUD is headed to 88 cents in 2013 was the inability of the AUD to get any kind of a fillip from the improved Chinese data recently. That is probably a fair point but the reality is that the AUD is already around 10 cents above what you might call fair value so its probably simply the case that with all the other drivers moving around and actually pointing lower that the Aussie just isn't going to race higher anytime soon unless equities get a run on. 

As I noted yesterday the question of where the Aussie is headed is more likely than not to be resolved soon given the compression of ranges (remeber the ATR is at lows for many years) and the fall in volatility we are seeing. As Minsky showed us stability breeds instability  and I still favour an eventual break out but would position via options. 

Is Morgan Stanley right? As I suggested in the recent webinar pretty much all of the usual drivers are pointing lower but they lost their historically strong impact when Greece blew up  a second time in April/May 2011. So I have great sympathy with the MS view but time will tell. 

EURAUD - resistance

When you think about it with the Eurozone PMI's still in contraction territory and the Greek situation still unresolved and now little old Cyprus asking for a bailout, small bikkies I know, what right has the Euro got to rally against the US or Australian dollars both of which are doing much better economically. 

The answer of course is zero to none. But that's not how Global FX markets operate is it - perception, flow and positioning are of as much import as relative economic outlooks or trade data. Ans so it is that EURAUD has managed to rally on the back of the EURUSD rally and the fact that the AUDUSD has been stuck below the 1.04 congestion zone as I noted above. 
But EURAUD hit resistance as you can see in the chart above with the high overnight and was unable to close above the 200 day moving average at 1.2413. So is it time for a pullback and or profit taking for the longs. I'm saying yes unless last nights high gets taken out. 

AUDJPY - interim top is in

This cross has had a great run recently and while I still favour a move to 87ish eventually if the USDJPY is going to have a rest, in the manner I think, then this cross too is due a consolidation. Remember that these consolidations can either be time (sideways continuum) or price (fall). 

Now this is a very different take on yesterday's note isn't it and this bears explanation. The key for me is that when i followed my morning protocols and looked at all the markets that I look at the thing that i was struck by was the price action in USDJPY when combined with my  usual indicators of Bollinger Bands (width), MACD (height of histogram relative to recent levels), ADX (absolute level of +DMI) and ATR (increase in range recently) suggested to me that a top was in. 

It is analogous to the move in the S&P that I talked about Monday when I said I thought it was time for a bounce after Friday night's price action - same combination of indicators which forms my subjective system. 
Which brings me back to AUDJPY which is slighthly different to the USDJPY price action because it actually still had a positive day (as opposed to the USDJPY lower close) and it is not as extended nor is the ATR as stretched. but the bolly bands are. So I'm going to go out on a limb and say I expect a pullback back toward 84.15 soon. 

AUDNZD - consolidating above 1.27

Not much to say on this cross given their is no data or impetus to trade at the moment. I'm still of the view that a break below 1.2689 kicks this one lower - if it happens otherwise its 1.27-1.28. 
Have a great weekend
Greg McKennaCatch me on Twitter @gregorymckenna or FX_Global
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