AUDUSD - the only way is up...
In truth that head line is a bit of a misnomer as the AUD remains strong as an Ox, even stronger if truth be known after the risk rally overnight, but it still hasn't yet broken my level of 1.0420. The high overnight was 1.0409 which was the same level, roughly, as the high we saw in the AUD a couple of weeks back.
Given we are in a new month though it might be reasonable to expect that perhaps the big seller and what position they were protecting might have disappeared. Equally true could be the simple fact that the market wants Aussie and they want to try to take it higher because in this global ugly contest that is Currency markets the Aussie and Australia still stand out as a better place for your money than say Europe, the UK or Japan.
Now of course if the market was populated with rational automatons then the Aussie wouldn't be at 1.04, it wouldn't even be at 1.00 based on the so called fundamentals. But the reality is that things have changed for the Aussie and the perceptions that have of it and of Australia are different than they have been in the past. hard to fathom, yes - but this is a very different environment than at any other time since the AUD was floated in December 1983.
Looking technically today a break of 1.0410 will get the market going and I'll get a little bullish if 1.0420 gives way. resistance overhead is 1.0442 which is the 61.8% retracement of the big sell off from 1.06+ down to 1.0150. Support is 1.0380, 1.0360 and then 1.0335.
EURAUD - still edging lower
I should just be outright bullish on the AUD because when I look at all the Aussie crosses with the exception of the AUDNZD I see AUD doing better than the other side of the cross.
EURAUD is no exception and I remain of the view, articulated for a while now, that the EURAUD rate is headed for a test of the recent range bottom of 1.2344 which if the Aussie stays at 1.04 suggests a Euro much lower so while that may be the case it seems that either I'm wrong on this or the Aussie might be due a rally across the board - non-farm payrolls tonight will make or break this view.
AUDJPY - a range break would be mega bullish
This is one of the clearest charts in all of the Global FX landscape - the range has endured and is clear to the eye and every trader out there. But this fact holds with it both a warning and a promise - the warning is that the sellers have an easy place to prop and sell against and the promise is that if the range breaks the AUDJPY should run and run hard.
Once again NFP tongiht is going to be important as is the overall price action in USDJPY perhaps a confirmation in a break of 80.40 for USDJPY could be used as a trigger if AUDJPY breaks higher. Otherwise its just a big old range.
AUDNZD - can it find support or is it headed lower
I have a view on this pair that the NZD is usually the side of the pair that does most of the driving. Indeed I have this view for most pairs in so far as I believe the smaller side of the cross, the one that trades in the least daily volume, often drives the bus for the cross.
It doesn't matter so much for the big 4 or 5 traded currencies but it is an important dynamic when a smaller currency like the Kiwi is one side of the cross. The reason it is important is that if money flows into the smaller currency like the Kiwi in large amounts it can have an outsized impact compared to the AUD (equally true when it flows out).
That is what we saw overnight with the NZD breaking the last few weeks range high. AUDNZD fell even thought the AUD went higher as well.
I remain bullish longer term so any further downside is a buying opportunity.
Greg McKenna
@gregorymckenna on twitter where I am happy to answer any questions on this post.
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