Aud$, equities, commodities lower. Elsewhere, rangebound ahead of today's manufacturing data.

Markets were generally rangebound today although the Aud was the clear loser and looks set for yet lower levels in the days/weeks ahead and today’s HSBC China manufacturing data could help it on its way, if below par. Elsewhere the US$ took a bit of a rest, which could continue to be the case ahead of the US Durable Goods/GDP at the end of the week. Before then, today’s focus will be on the manufacturing PMI’s, led off by China, and then followed by the Markit figures from the EU. Another weak reading from Germany, France could see the Euro come under pressure as it heads towards the medium term 1.2750 target.

EUR/USD: 1.2850

It has been a rather uninspired session for the most part, with the Euro stuck in a 50 point range as it consolidates ahead of today’s manufacturing PMI’s, which could again put the pressure on the Euro should they continue the recent theme of underperformance. Not even Mario Draghi’s dovish outlook on the EU was able to cause too many waves today, although he did cause a brief dip to 1.2815. Speaking before the economic affairs committee of the EU parliament, he said that the risks to the EU are “clearly on the downside” and that recent data has given “no indication” that the sharp decline is slowing, adding that ECB is ready to use more unconventional tools to boost inflation and growth if necessary.

Technically there is little change today, after trading a 1.2867/1.2815 range, although the Euro did make a new trend low at 1.2815 after Draghi spoke, below Fridays 1.2828 close.

The overall bias remains lower, still with a break of 1.28 suggesting a run towards the target area of 1.2780 (61.8% of 1.2041/1.3995) which comes just ahead of the major rising trend support from July 2001 at 1.2760 and the 9 July 2013 low at 1.2754. The daily charts are reaching oversold levels and so the downside momentum should begin to slow here, but I don’t think it is going to turn around much and once the charts have had the time to unwind, which may take a few days, I suspect that we are in for a run towards the November 2012 low at 1.2660 and then 1.2500 (76.4%of 1.2041/1.3995). Below here we then look likely to ratchet our way lower towards the 22 July low at 1.2041.

If we do see another squeeze to the topside, which the shorter term charts suggest is possible, the initial resistance is at the session high at 1.2867 and then at the 100 HMA, currently at 1.2890. It would appear though that the Euro is going to struggle to make it back to 1.2900 today and the 200 HMA at 1.2910 will provide added resistance. If we do see a larger short squeeze, then look for further sellers to emerge at the descending trend resistance at 1.2925 but it will need some strong PMI’s from the EU to see the Euro squeeze back above here and on towards 1.3000. I cannot see it happening, and right now would again use a squeeze towards 1.2900/25, should we see one, to sell into.

Economic data highlights will include:

EU Flash Mfg PMI’s, US Flash Mfg PMI, Richmond Fed Mfg Index.

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EUR/USD: 4 Hour

USD/JPY: 108.75

US$Jpy has stuck to chopping around either side of 109.00 today but currently sits near the lower end of the range and it looks as though the dollar could come under further pressure in the sessions ahead, allowing the shorter term charts to unwind their overbought condition. Today though is a Japanese holiday and we could be in for more of the same sort of choppy price action, but looking a bit limited in the short term above 109.00

With the 4 hour charts looking as though they may be building a short term topping formation, we could see a push ,below today’s session low at 108.65, towards the support at 108.50/55 and then on to 108.35 (100 HMA). A break of this level could see the dollar fall back below 108.00 towards the 200 HMA at 107.75 and potentially to retest the breakout level at 107.35, although such a move currently looks over the horizon given the Japanese holiday.

The topside looks limited to 109.00 today although a squeeze to the session high of 109.18 cannot be ruled out. I don’t think we are going close to Friday’s 109.45 high, but over the next few sessions this is possible, maybe after the US data later in the week.

If/when 109.50 is overcome then the next realistic target is at 110.65 (August 2008 high), above which would head on to 112.50 (76.4% Fibo level of 124.13/75.56). A break of this would suggest that the dollar is on its way to the July 2007 high at 123.65 although we have a lot of work to do before then.

Today, use 108.50/109.00 as a guide. A bigger technical correction is required but the economic macro’s are ignoring the technicals right now so buying dips is still the name of the game in the medium term.

Economic data highlights will include:

Japan Holiday.

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USD/JPY:4 Hour

GBP/USD: 1.6360

Cable had a wild ride last week and having finished Friday at 1.6290, it has again squeezed higher to finish at 1.6365 as traders return their focus to the UK data and growth outlook, with an eye on when the BOE will eventually hike rates.

More consolidation between 1.6300 and last week’s 1.6525 high looks probable over the next few days and for the coming session, in the absence of any UK data, 1.63/1.64 could well cover it.

Technically, Cable has closed at the 1.6360 resistance that we mentioned yesterday, and while the short term charts look mixed, the dailies still point higher so we could yet see a run on towards 1.6400/15. I think up here it would probably be a decent sell opportunity, but if wrong further strength would see Cable head back towards 1.6470 and possibly back to last week’s high although I suspect it would need some pretty soft US data later in the week to see it back here.

The downside looks underpinned today at minor rising trend support at 1.6320. I doubt that we are heading below here, but back below the weekly close at 1.6290 (1.6280: 200 HMA) would see a return towards 1.6240 and possibly to 1.6162 (16 Sept low.

For today use 1.6320/1.6400 as a guide.

Economic data highlights will include:

Public Sector Net Borrowing.

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GBP/USD: 4 Hour

USD/CHF: 0.9400

US$Chf is unchanged today, sitting just above 0.9400 after being contained in a range of 0.9380/0.9420.

Unlike the Euro, it did not make a new trend high today, and the bearish divergence in the short term charts suggest that the dollar may struggle to hang on to 0.9400 as the day wears on.

The downside will again see minor support at 0.9380 and then at 0.9360 (200 HMA),  below which would suggest a test of Friday’s low at 0.9333 and under this, 0.9300.

The topside is struggling to overcome the major Fibo resistance at the current level (61.8%  of 0.9838/0.8698) , which may continue to slow progress and we need to break above today’s 0.9420 and last week’s 0.9432 tops in order to make a run for the next target the 6 Sept 2013 high at 0.9455. Above that, there is little to stop the dollar heading to 0.9570 (76.4% Fibo level of 0.9838/0.8698), albeit not today.

Look for a similar session to Monday’s, with a mild downside bias for the dollar..

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USD/CHF:4 Hour

AUD/USD: 0.8878

The Aud came under pressure again today, not helped by Chinese growth concerns, softer commodity prices (both Iron Ore and Gold) on the back of the stronger US$  and a  SMH report that  suggested  that the Aud is heading to 0.7500 next year due to a lower GDP and consequent interest rate cuts from the RBA.

nearer home, today’s release of the HSBC China Flash Mfg PMI will be closely watched and if it comes in below expectations of 50.00, the Aud could well take another run to the downside.

Technically, the Aud has today met the 0.8860 objective (76.4% of 0.8660/0.9505) by reaching 0.8852 before a mild bounce.

Although the hourlies suggest we may rest here for a while, and could even squeeze a little higher, the longer term charts show no sign of turning around. A break of the Fibo/session low and 0.8850 would possibly lead to an acceleration lower towards 0.8800 and to the 1.618 Fibo extension of the head/shoulder target at 0.8790. This could take a while to come about but the medium/longer term indicators don’t look healthy and it is beginning to look as though the Aud may eventually want to retest the January low at 0.8660.

A short squeeze would see a run back towards 0.8900 and possibly to 0.8925. The descending trend resistance is now seen at the session high of 0.8949 – and I would be doubtful of heading above here any time soon. If wrong, look for a squeeze back above 0.9000, where stops would be triggered, towards 0.9100; we will worry about that if we see it, but if, as I suspect, we make a monthly close (next week) below the monthly trend line at 0.8990, then the way opens up to lower levels ahead for the Aud.

Economic data highlights will include:

HSBC China Flash Mfg PMI.

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AUD/USD:4 Hour

NZD/USD: 0.8123

After an early run higher on the back of the election result, the Kiwi took a second look at the Aud$ and slid lower on the back of concerns over slowing Chinese growth and lower commodity prices. More of the same could be in store today if the Chinese manufacturing data comes in below par, for a more concerted test of 0.8100.

Technically, the price action looks set to remain choppy and contained within the recent range. I would be surprised to see the Kiwi back above the session high of 0.8170, but if wrong the descending trend resistance at 0.8200 should contain it.

On the downside, the session low at 0.8098 will provide support, a break of which would then again open up the trend low at 0.8076. Below this would head towards the 2014 low at 0.8051 on Feb 4, from where it previously bounced sharply but a break of which would probably head quickly to 0.8000 and lower, to Fibo support at 0.7985 (76.4% of 0.7670-0.8839) but not for a while.

As with the Aud, sell into strength, but with one eye on the HSBC PMI which is slated to come in at 50.00.

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NZD/USD:4 Hour