USD Trading Outlook
AUD/USD Sideways chop continues in AUDUSD. Shanghai A shares saved themselves..again...right on the year-long uptrend line, which turned out to be fortuitous for the All-Ords, that had a look at the 200 dma support this week. Combine that with a miss in the Personal Spending component of the US PCE data and it put a dagger to the bond bears and calmed the waters further across the carry currencies. The downside threat to Oz remains the loss of support in the domestic rate market as well as some potential trouble in major asset markets. The European stock and bond markets have given back all of their ECB gains and key reversals in Canada and the US from Tuesday are still in play. Bottom line is that the risk-on/risk-off game is at a deadlock, but whichever way it breaks, the AUD is sure to follow.
AUD/USD The chop fest in AUDUSD continued as a shocking revision to Q1 US GDP (-2.9%) and weaker Durable Goods Orders (-1%) hit the USD pretty much across the board and saved the AUD bulls (for now) from a collapse in Aussie interest rates. The break lower in US rates is only surpassed by those in Australia and sets up a conundrum for the Street where opinion seems evenly divided. While Oz is quickly becoming a less attractive carry play, the FX markets are still willing to give the benefit of doubt to the risk-on trade. AUD is stuck as a result. Chinese and Australian equity markets look heavy and the Europeans have all given back their post-ECB gains, closing below June 5 levels. Even though the US market held up today, yesterday's key reversal in the S&P is still in play (barring new highs) and we feel that a risk-off trade...and a lower AUDUSD...can't be dismissed.
AUD/USD ratcheted lower throughout the NorAm session as Monday's China PMI fades into the background and the gravitational pull from lower Aussie rates takes over. Bank Bill futures closed at contract highs as the BHP Iron Ore layoff story got traction with the London and NY crowds. The gap created on the Chinese data point on Monday at .9390ish held briefly but better than expected US data (Consumer Confidence and Home Sales) pushed the USD trade higher across the board. Heads up for a potential key reversal in the S&P that could alter the risk landscape short term, and with the All Ords looking toppy the Oz could find itself under renewed pressure if equity markets retreat. Key data point tomorrow and Thursday in the US in the form of Capex and Core PCE. The markets are dying for a trade here and are hoping a good result will break the rate market out of it's range.
AUD/USD spent the NorAm session slowly dribbling back the gains made after yesterday's China PMI beat. Specs were sellers against the April highs (.9460) figuring that with Oz interest rates still soft and the Shanghai Index unable to get too far from the critical 2000 level it will take more than one number to change the currency's fortune significantly. Immediate support rests in the .9390 area, which was the inflection point for the PMI data and the 200 hma (see chart below). Otherwise, the USD remained softer against the other majors as US rates continue to recede, much to the consternation of Wall St. Vol continues to be a killer for the higher rate/higher USD contingent.
AUD/USD Further frustration with the pair's ability to clear June's high and rising US bond yields led to further profit taking in the overnight session. The pair sat near 0.9400 as NY got going. Pressure remained in early NY as the bond yield rise persisted and the USD was broadly bid with the exception being against CAD. Bids into 0.9385/90, where the 200-HMA sat) were filled and a low of 0.9378 was made. A give back of yield gains alleviated some pressure into the afternoon & the pair sat just below 0.9390 late in the day. Bulls may be close to throwing in the towel in the s-t. The pair's inability to hold above 0.9400, RSIs rolling over from near o/b territory and narrower yield spreads are concenrs for AUD longs. There is little in the way of Oz data next week so traders will look to China's June HSBC Mfg PMI, EZ MFg PMIs and the US Q1 GDP for AUD direction.
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