AUDUSD - bounced higher with stocks
The Aussie dollar remains well supported by real money as the press continues to report players as diverse as Azerbaijan and Switzerland continue to accumulate Australian Assets and the Aussie dollar. You can see it in the price action too as the Aussie has steadfastly withstood everything the global financial crisis has been able to throw at it over the past years or two and not been able to get down below 95 cents against the US dollar.So it is obvious that for the moment, particularly while the Australian yield differential is so positively in the Aussie's favour that the AUD is a glass half full currency. That is, good news has a bigger impact than bad news.
So it was over the last 24 hours with the AUD having had a failed break higher the previous day with a high of 1.0489 it traded back to a low overnight of 1.0424 but sits now at 1.0475 near the top of the recent range.
As you can see in the chart above which is the hourly bars of the AUDUSD versus the SPX Futures from my Vantage terminal the Aussie is trading largely up and down with stocks. Given the potential volatility in sentiment about the fiscal cliff trade in the AUD is likely to be fraught as well but ultimately we'd have to expect a positive outcome so a higher AUD into year end would be a reasonable expectation.
Now punting on politicians is always a dangerous strategy so we favour small positions in the next few weeks and a strict adherence to your usual risk and trade management strategies but opportunities will present themselves.
EURAUD - still constrained by downtrend
Euro and Aussie are trading in a very similar manner at present so there is not a lot of impetus in this trade given that it is largely a reflection of the stock market sentiment.
As you can see in the chart above the EURAUD had another down day as the Aussie outpointed it but there is no obvious impetus for a trade here at all at the moment. It is hard enough trying to trade either of the two sides of the cross against the USD at the moment but more medium term if we are going to get a resolution to the fiscal cliff over the next few weeks and a stock rally then EURAUD should fall. If you take the opposite view the reverse is true - maybe its not that hard after all, as long as you know which way the politicians are going to go.
AUDJPY - a day behind dollar Yen
USDJPY was lower again overnight but the strength in the AUD saw AUDJPY come back from the lows of yesterday. It is an interesting chart at the moment and looks very similar to the USDJPY chart one day ago.
Does that mean that AUDJPY will reverse lower once again today/tonight? The answer has to be yes if AUDUSD can not get through the recent range top and USDJPY continues to fall as I expect that it will. The technicals tend to agree as well.
AUDNZD - Yawn
This cross is a bit like watching the last session of a Cricket Test you know is going to be drawn. There is some interest if you are an avid supporter of either side but for the most part it is just boring.
And so it is with AUDNZD at the moment as the chart above shows. There is no trade here at the moment and I am leaving it alone.
Greg McKenna
Catch me on Twitter @gregorymckenna or @FX_Global
