AUD/USD: I'm looking to buy dips
We saw some decent buying this morning from real money funds at 1.0460 and now the pair is already 70 pips lower and looking soft. I feel there could be a good opportunity to buy a dip here and I'm studying the 4-hr chart and hoping to get an opportunity around the 1.0335/40 level, if the current panic-selling continues.
AUD/JPY still getting smashed: Chinese warships on the move
A quick look at the daily chart shows that there has been a huge move lower in AUD/JPY today. The HSBC flash PMI was pretty much as expected and regional equity markets are lower, but not excessively so. Chinese warships have been reportedly moving towards the disputed Diaoyu Islands and this has caused some serious risk-off sentiment as well as JPY buying ahead of possible FX repatriation.
How to go poor trading FX, part I
Sell dips in Asia!
Yes just occasionally the market starts a move in Asia but don't forget that the bottle is notoriously empty during this session and the market gets itself very quickly very bearish. More often than not, Europe walks in, says 'what the hell was Asia thinking' and promptly reverses whatever happened here.
In other words, don't get bearish at the bottom during Asia. Its usually the guy who waits for the silly dip who makes the easy bucks.
Chinese stocks now off their lows, -1.1% for the session. AUD/JPY support at 81.60 holding for now, but only barely.
AUD/JPY techs: Looks bearish but key support looming
The 4-hr chart shows that this pair has broken below a pivotal level at 81.80 but there is more important support looming at 81.60, where a 61.8% retracement sits and the bullish trendline is right behind there.
If AUD/JPY breaks below there then I will be in aggressive rally-selling mode.
Risk trades getting hit as Chinese stocks fall
I'm now in sell rally mode on pairs like EUR/JPY, EUR/USD and AUD/USD as risk appetite wanes in Asia. The Shanghai stock market is down by almost 1.25% and this has been a leading indicator for the AUD in particular in recent sessions.
There are plenty of buyers still around in EUR/USD and AUD/USD so I prefer to wait for 30 pip rallies before entering.
Majors unchanged after HSBC China PMI
The September flash of China manufacturing PMI came in close to expectations at 47.8, up marginally from August's final reading at 47.6.
No change in the majors and EUR/JPY is still the pair grabbing my attention with no sign yet of any bounce materialising.
EUR/JPY seriously testing support levels
A clean break below previous hourly lows at 102.09 would certainly have the short-term bears back in control but the fight isn't over yet. Don't forget that the HSBC China PMI is due out in 30 minutes and that will surely add to volatility.
EUR/JPY still looks like key pair intraday
Nothing much going on at all this morning and the 102.20 level in EUR/JPY which we looked at earlier still looks like being the key to intraday moves. If it breaks below then we should see pairs like EUR/USD and even AUD/USD follow suit. If it holds, then we could see some modest relief rallies.
Members club: Fresh EUR/USD trade idea
One of the hedge funds I speak with has just put on an intraday EUR/USD trade and you can find all the details in the members club section.
AUD outlook: QE, RBA, Commodities, China, and the weekly wedge
There are plenty of factors affecting the AUD at the moment:
- Easier policy from the Fed and the BOJ is risk-trade and AUD positive.
- The RBA is likely to cut rates by 50 bps in the next 3 months but may not start until November. Overall this should be AUD negative but much is already written in and there is still some uncertainty.
- Oil and Iron Ore have been very volatile in recent times and the AUD is swaying with the punches.
- The Chinese economy has hit a road-bump but is still growing at a very respectable pace. The question here is how much optimism is built into the currently ueber-strong AUD.
In other words, range-trading is a very sensible play. Short-term support has now emerged at 1.0400 and some heavy GBP/AUD selling overnight also gave the AUD a boost. Nevertheless there were plenty of sellers lined up above 1.0500 and they easily capped the rally.
Overall I still think we are due for a test of the weekly wedge highs near 1.0700 but I don't fancy entering a long position until stronger support levels near 1.0335 are tested.
EUR/JPY likely to be the key during Asian trade; important support close-by.
Let's have a good look at EUR/JPY to start the day. The daily chart is in a clear down-trend after a 5-wave move from 111.40 to 94.10 so we should be in rally-selling mode there. Nevertheless the 50% retracement has been breached implying that further gains and the 61.8% retracement level at 104.80 remains a possibility. The up-move clearly accelerated as soon as it broke above 99.00 so this level become the first major support point.
The shorter-term charts are in bullish mode but are retracing after highs were posted at 103.80. The 38.2% retracement of 99.50/103.80 comes in at 102.20 and this level is trying to form a short-term base. If this level breaks, we should see a minimum move to 101.15 and possibly even 100.50.
Conclusion: This pair is offering excellent two-way trading opportunities and should be watched closely. Both the long-term down-trend and the short-term up-trend are quite strong, another good sign for trading opportunities. I'd play 100.50/105.00 over the coming weeks and we may be able to get aggressive near the edges.
EUR/JPY: Gets smashed back to pre-BOJ levels
I think the market has had a good long look at the BOJ details and decided that its unlikely to have any lasting effect, hence the EUR/JPY reversal.
There is solid technical support in the cross at 102.40 and again at 102.20 and I'm still keen to re-enter my USD/JPY longs around 78.70/75 (and it looks like I'll get them).
RBA to cut rates by 1% in next 9 months: Deutsche Bank
Just reading a research piece by Deutsche Bank in which they say that the RBA will bring the cash rate down to 2.5% by mid-2013. Slumping Chinese steel prices and lowered growth forecasts for the Chinese economy are the main reasons behind their analysis. Easier policy by the Fed and the BOJ will also undoubtedly help tip the RBA's hand. DB says that the RBA will cut by 50bps this year and by another 50bps in H1 of 2013.
Most local Australian banks also agree that the RBA will cut by 50bps this year, though there is plenty of disagreement whether these cuts will start in October or not.
EUR/GBP: I'm bullish but where is best entry level
The 4-hr chart shows that the uptrend accelerated off .7885 but stalled at .8110 and is now retracing. The 38.2% retracement is near .8025 and this was the approximate low last night. I'm watching the hourly chart for signs of a turn and if that happens then I'll jump on board with a tight-ish stop.
The ideal entry level for medium-term longs is around .7970 so perhaps we will need to show some patience (never a spot traders best trait :) ).
AUD/USD: Still looks like 1.04/1.05
AUD/USD has stalled twice near 1.0400 and technical support is certainly strengthening but the big investment banks all report sell orders starting at 1.0500, which sounds like the perfect recipe for range trading.
My short-term bias is slightly bullish as risk sentiment should continue to improve post Fed and BOJ and this should outweigh any soft-ish economic data out of China. Medium-term I still like the idea of selling near the top of the weekly wedge, currently just below 1.0700.