AUDUSD - looking for support
The Aussie is lagging a little at the moment as what seems to us a combination of a lot of short term longs and weak data recently weigh just a little on sentiment.
Data is always important for FX markets because it drives sentiment and expectations which in turn drive prices - now of course you can look just as prices and trade purely technically or as a trend follower but not everyone has the psychological make up to do that so we have a broader tool kit.
Part of that toolkit is the data but we like a derivative of the data which is how it prints relative to the pundits expectations. This "surprise" index is published by Citibank and as you can see above the Australian data has for a while now been weaker than pundits expected and is only just getting back to about level as pundits have recalibrated their expectations for the Australian economy.
So with so much data out in Australia this week including an expected RBA rate cut, Q3 GDP data Wednesday and Employment data thursday not to mention the raft of other 2nd tier but very important data here and overseas.
On balance though with positioning as expressed by the CFTC COT report at the high end of longs and with the top of the range having proved solid again last week the AUD is probably slightly more vulnerable to the downside against the US dollar and will lag on the crosses.
As you can see in the chart above though it is hardly a super negative outlook either and 1.0380/85 looks likely to support short term.
EURAUD - broken finally
The Euro still can't quite get up through and hold above 1.30 which has slowed its rise against the Australian dollar with the EURAUD rate largely driven Friday by moves in the AUDUSD. The high in EURAUD corresponded with the weakest parts of the trading day for AUDUSD .
The fact that EURAUD couldn't get through the 61.8% retracement level of the recent sell off is reason for caution but overall in a trend sense our trend following system is long.
AUDJPY - higher but not highest
Like the USDJPY, AUDJPY pushed higher on Yen weakness Friday after the release of the ¥1.2 Trillion stimulus package. Also like USDJPY however AUDJPY did not make a new high for this run. As I have noted elsewhere this morning the level of yen shorts is at a 5 year high which while it makes sense given our own view USDJPY is on a long term return to 100 is a signal that the short Yen trade is a crowded one.
I favour being short AUDJPY unless or until the AUDJPY recent high breaks by 13 points
AUDNZD - down up
Daily commentary on this cross is getting very boring as it continues to drift sideways. There is however enough data out this week to get this one moving again but we would not play unless the two sides of the recent range break - either 1.2752 or 1.2652.
Greg McKenna
Catch me on Twitter @gregorymckenna or @FX_Global
