US$, Stocks underpinned by firm factory data. RBA decision today's main event.

The markets have had a generally quiet session in the absence of the UK and Japan, (which will be out again today) although the dollar and equities were generally underpinned by some firm US factory data. Things will liven up though, starting in Australia, when the RBA monetary Policy announcement is released. The general expectation that the RBA will cut rates would put the Aud back under pressure, while no cut would see a spike back towards the recent highs. Later in the day, Europe will get the EU Economic Growth Forecast and the PPI, while from the US, the Trade Balance and the ISM Non Mfg PMI, Services and Composite PMI’s are due.

EUR/USD: 1.1146

Euro is mildly lower today as traders became cautious ahead of an eventful week which will culminate in the Non-Farm Payrolls on Friday. The data from the EU was generally positive, with the manufacturing PMI being revised slightly higher to 52.0 in April, up from the initial estimate of 51.9 while the German figure was revised up to 52.1. Elsewhere in the EU, the Italian figure rose to 53.8 while the French PMI was revised lower to 48.and Spain dropped to 54.2. The Sentix investor confidence dropped to 19.6 in May but beat expectation of 19.1. Later in the day, the dollar was underpinned by the biggest gain in U.S. factory orders in eight months. An article in the FT suggesting that the IMF are going to take a hard line on Greece also helped to cap the Euro to an extent.

After a brief run up to the session high, in late Asian trade reaching 1.1223 , the Euro has eased back to a low of 1.1121, before closing at 1.1150, with little change from a technical perspective.

Below the session low, the next support is at 1.1100 and close by at 1.1090 (23.6% of 1.0520/1.1290). Under here there is minor support seen at 1.1070, beneath which there would not be too much to hold it ahead of 1.1000 (38.2% of 1.0520/1.1290) but which does not currently look likely to be seen yet, although the 4 hour charts are now pointing lower, so the downside would seem to be the general direction to watch today.

On the topside, minor resistance is seen at 1.1175, above which could see a return to 1.1200 although I don’t think we are headed back to much above here today. If wrong, back above the 1.1223 session high would take the Euro back towards Friday’s trend high at 1.1290 which is also strong Fibo resistance (23.6% of 1.3993/1.0461). Whether that is the top of the current squeeze or not remains to be seen, but 1.1290 would again be very strong resistance, if seen, above which the Euro would encounter further sellers at the 100 DMA at 1.1300, and so will not be an easy area to overcome. If wrong, above 1.1300 could see an acceleration to the topside, where the next port of call would be at 1.1378 (26 Feb high), 1.1400 and 1.1449 (19 Feb high) and then further out at 1.1533 (3 Feb high).

For today look for a day of 1.1080/1.1180 to largely cover it.

Economic data highlights will include:

EU Economic Growth Forecast, EU PPI, US Trade Balance, ISM Non Mfg PMI, Services/Composite PMI..

Meta Trader – AxiTrader   EUR/USD: 4 Hour

USD/JPY: 120.14

US$Jpy is virtually unchanged today after a tight 120.00/120.27 range, and given that it is a Japan holiday again we can probably expect more of the same.

Above today’s high, where there is now a minor double top, would allow the dollar to head back on towards minor resistance at 120.60 and then to 120.85 (13 Apr high) and 121.00. A topside break of 121.00 would open up the 20 March high at 121.20, the consolidation area at around 121.50 and the 10 March high at 122.02. If/when this level can be overcome, the way would open up for a run towards the 15 July 2007 high at 122.42, and in the longer term, the target of 124.13 (17 June 2007 high) would appear on the horizon but will take time.

Back below 120.00 and 119.93 (daily cloud base), the downside has support at 119.85 and at 119.50 (both minor), ahead of the 200/100 HMAs at 119.40. Below this, which looks a little unlikely, would return to the daily cloud base at 118.92. Below there,  118.50 would see good bids ahead of the 26 March low (118.32), the Fibo support at 118.20 (61.8% of 115.85/122.02) and 118.00, but below which there is not too much to provide support until 117.30 (76.4%)..

Meta Trader – AxiTrader   USD/JPY: 4 Hour

GBP/USD: 1.5121

In thin trade, due to the UK holiday, Cable remained under pressure for much of the session, heading down to 1.5089 ahead of a minor bounce taking it back to 1.5120 where it is finishing the US session.

With the Election now only a couple of days away, I would expect more of the same, and on the evidence of the negative  indicators on the  4 hour charts, another test of the downside can possibly be expected.

Having broken back below the 100 DMA (1.5160), this will act as near term resistance as Cable looks to head back below today’s session low, towards the 55 DMA at 1.5055, which is also where the top of the previous long term descending channel lies. Back in the channel, would signal that the recent move higher was a false break and would signal further downside progress towards 1.5028 (50% pivot of 1.4565/1.5491) and 1.5000. Below here would open the way for a deeper decline to 1.4918 (61.8% of 1.4565/1.5491) and 1.4855 (21 April low) and 1.4785 (76.4%).

Above 1.5160, and the session high at 1.5175, would again open up a move to 1.5200 although I don’t think we see it up here today. If wrong, above 1.5200 would open the way to 1.5215 (200 HMA) and 1.5295 (1000 HMA) although this looks unlikely to be seen again for quite a while.

Selling rallies remains the general theme..

Meta Trader – AxiTrader   GBP/USD: 4 Hour

USD/CHF: 0.9333

US$Chf is attempting to make a recovery and has bounced mildly off the session lows of 0.9312 to reach a peak today of 0.9383.

While the short term charts are positive, the dailies still look less certain of the upside and appear rather heavy, suggesting that we could be in for some more downside pressure before any chance of any serious dollar recovery. If so, below today’s low would open up the chance of a move to Friday’s trend low of 0.9276, below which would find bids 0.9250 and at 0.9210, which lies at the base of the channel that US$Chf currently appears to be building for itself.

On the topside, above today’s 0.9398 high would allow the chance of another run towards 0.9400 and then to Thursday’s spike high of 0.9445 and then to the 200 HMA at 0.9485..

Meta Trader – AxiTrader    USD/CHF: 4 Hour

AUD/USD: 0.7836

The market is pretty much on hold today ahead of the RBA announcement, at which a rate cut is generally expected. That being the case, the Aud should head lower, although if there is no cut, the market is already short and could result in another nasty squeeze higher.

There is little change in the outlook.

Ahead of the announcement, the topside will today see sellers at 0.7865 (200 HMA) and then at the minor Fibo levels of the fall from 0.8074 at 0.7905 (38.2%) and 0.7938 (50%). Above here would suggest another run to 0.8000, although there would be plenty of sellers lining up should we see it up here.

Below today’s 0.7801 low, where the 100 Month MA currently sits, would head towards 0.7753 (61.8% of 0.7552/0.8074) and then towards 0.7740 (55 DMA). Back below this would then open up 0.7700 and the 21 April low at 0.7697.

Wait and see what the RBA come up with. I think they will cut and that the Aud will head towards 0.7750.

Economic data highlights will include:

AIG Performance of Services Index, HIA New Home Sales, RBA Interest Rate Decision, Statement.

Meta Trader – AxiTrader    AUD/USD: 4 Hour

NZD/USD: 0.7533

The Kiwi has consolidated today, leaving the technical outlook unchanged. Direction will be driven by the RBA and then later tonight, the Global Dairy Trade Index is due

The initial support is at 0.7500/05, below which would see a run towards 0.7465 (50% pivot of 0.7175/0.7743), 0.7421 (13 Apr low) and 0.7399 (61.8% of 0.7175/0.7743).

The topside will now see sellers at today’s high at 0.7557 above which would head back to 0.7570 and then to 0.760010 (100/200 HMA) above which could see a run towards 0.7640, although I don’t think we go close to it today unless the RBA sit on their hands and the Kiwi gets dragged along for the ride.

To me it looks as though a bearish flag may be forming, so prefer to trade it from the short side, but the outcome of this will depend largely on the RBA today.

Economic data highlights will include:

Global Dairy Trade Index.

Meta Trader – AxiTrader    NZD/USD: 4 Hour