AUDUSD - Becalmed
The AUD has had limited ranges over the past day or so and well inside the 1.0280-1.0420 range it seems to be in but the question occupying my mind is whether or not this benign trade can continue. When you look at both the Bollinger Bands and the Average True Range (20) measures you can see the impact of this lack of volatility.
The ATR is at its lowest level for more than 4 years at the moment with the last time it got anywhere near these levels it broke sharply to the downside. Now the fact that volatility is so low doesn't necessarily mean the AUD is going to break lower soon but as a follower of Minsky I believe that the compression of daily volatility suggests instability in the future. It could be topside or downside so I'd probably be looking at the options market at present as the way to play the Aussie dollar until something more concrete emerges.
EURAUD - constrained below 200 day moving average
EURAUD had a bit of a further rally overnight but pulled up just below the level we identified as a potential for a further move at 1.24 with a high of 1.2399. The 200 day moving average comes in at 1.2412 so I would move my zone of entry a few points above that if I was going to trade with a break higher.As it stands at the moment the Euro's ability to shrug of the issues surrounding Greece is impressive for the moment but it is equally probably tied to the continued rally in the stock markets and the impact this is having on the USD as well as flows from the EURJPY as the yen weakens materially
As you can see in the chart above the EURAUD there is a chance that it has made a double top up here at 1.24 so we are watching that and as I say above only a break of the 200 d ma would turn me bullish.
AUDJPY - Breaking higher still
Even though the AUD is directionless against the USD at the moment the action in the Yen continues and it continues to look like it is biased up toward 87 sometime soon. Presently however as AUD is going nowhere against the USD it is the Yen side of the cross.We've written much about the yen lately and it remains our view that substantial weakness is still ahead for Yen given that it is fundamentally too strong for the Japanese economy and has been for too too long. Obviously its fall won't be a straight line but Yen weakness looks to be an enduring trend.
Which of course is likely to bias the AUDJPY higher in time although at the moment as you can see in the 4 hour chart above AUDJPY might be a little stretched. Any move back toward 84.15 would be massive support.
AUDNZD - nothing to see here
Nothing to see here, move along as they say in the movies with the AUDNZD which is lacking any real catalyst to trade at the moment. It remains the case that it the AUDNZD trades down through 1.2689 that It looks likely to head lower and that remains our focus at present but for now it is becalmed.
Greg McKenna
Catch me on Twitter @gregorymckenna or @FX_Global
