The US dollar remains strong against all the currencies since yesterday, erasing little by little its post-minutes losses. EURUSD is back to 1.2660, the trend looks bearish and we would set our short term target at 1.2600. A bit late for bears (above 1.2750 was a perfect level to short the pair again), but there is little room for the downside. I’d play short EUR/GBP at 0.7900; a GBP strength relative to the Euro is inevitable, long-term bears just have to be patient for the 0.7500 retracement.
AUDUSD is back to 0.8700 (beginning of the week’s level), despite strong employment reports yesterday in Australia, with full time employment up to 21.6K in September (from 14.3 the previous month). We read that global growth worries will continue to weigh on the Aussie (with always the same story with China’s) slowdown, and the market clearly sees an Aussie trading at 80 cents against the greenback sometime in mid-2015. Next support on the downside stands at 0.8650 (we’ll see if it holds this time).
On the Yen side, we clearly think the bearish USDJPY momentum is not over yet and the JPY should continue to strengthen in the short until we see the big buyers-on-dips. The next support on the downside stands at 107.14, which corresponds to the lower band of the Bollinger Band (20,2x), followed by the psychological 107.
Bonus Chart before US opens:
On Tuesday, the RBA released its monetary policy statement and Australian Officials decided to keep their cash rate steady at 2.5%. It seems that the central bank switched to a more ‘neutral’ stance and is not fighting against the appreciation of the Aussie anymore (back in November last year, Glenn Stevens insisted on the fact that the Aussie remained ‘uncomfortably high’ when it was trading between 0.9450 – 0.9500). Therefore, even if we feel pretty bearish on AUDUSD based on market sentiment (further decline in commodities such as iron ore, weakening trading partners…), we could potentially see a pause for a moment at around 0.9000.
The Aussie eased 100 pips against the greenback during Monday’s Asian trading session after officials figures showed building approvals fell 5.6% in April (vs 1.8% expected), which confirmed that the housing sector remains weak. However, we saw a lower than expected Q1 current account deficit on Tuesday (AUD 5.7bn vs AUD 7.0bn), which pushed Q1 GDP figures up a bit (3.5% YoY and 1.1% QoQ vs. 3.3% and 1.0% respectively).
The pair’s next support on the downside stands at 0.9200, which was hit a few times since the beginning of April. In case of a strong NFP report on Friday (expected at 220K), the Aussie could be sold to the 0.9120/30 zone (March 26th low and 100-SMA). We think it could be worth playing the ST downside ahead on Friday’s US employment data; we will try to short some AUDUSD above the 0.9300 level for a test back towards 0.9130 (tight stop loss above 0.9340).