RBA to be the highlight today. Expected no change has seen a strong recovery in the Aud.
The Aud has recovered well from the Asian session lows, dragging the Kiwi along with it ahead of the RBA decision later today. Elsewhere Euro remains soft but rangebound ahead of the ECB on Thursday. The Yen has been steady after Kuroda’s confirmation as BOJ Governor.
|Res||1.3030||1.3070||1.3100||Poor Consumer Sentiment from the EU today fed expectations of a potential ECB rate cut on Thursday and kept pressure on the Euro. ……scroll down|
|Res||93.70||94.00||94.50||The dollar halted at the Fibo resistance on Monday and retreated a little as the Yen held its ground ..…scroll down|
|Res||1.5150||1.5180||1.5215||Despite the very poor UK Construction PMI, which came in at 46.8, against expectations of a reading of 49, Cable held its ground today ..…scroll down|
The dollar has spent the day consolidating below Fridays high in a very quiet 30 point trading range.…scroll down
|Res||1.0200||1.0225||1.0250||The word of the moves by China to reign in property speculation sent the Shanghai Composite Index reeling yesterday and this quickly flowed through to the Aud ……scroll down|
|Res||0.8285||0.8295||0.8325||As with the Aud, the Kiwi was under pressure for much of the day yesterday following the word that China will act on property speculation but has since recovered its lost ground …scroll down|
|Commodities / Indices|
|ASX SPI: 5040||Outlook|
|Res||5065||5080||5095||The SPI held 5000 and rebounded and more trade within the 5010/70 range looks likely. Indicators are mixed, confusing the issue. Downside pressure may resume if/when the RBA sit on their hands, but is probably largely written in.|
|S+P Futs: 1521||Outlook|
|Res||1525||1530||1540||The S+P has recovered well from its session lows and in the short term is building positive momentum for a possible move on 1530. Dailies remain lukewarm though it maybe that 1530 continues to cap it. If wrong 1540 and 1575 is on the cards. Good support is now at 1500/05.|
|DJI Futs: 14095||Outlook|
|Res||14100||14130||14200||Positive short term momentum is countered by lukewarm dailies and thus further trade around 14100 looks likely.|
|Res||1580||1590||1600||A sideways session. The short term momentum indicators are non committal and thus more in the 1560/85 area looks most likely.|
|Res||28.80||29.20||29.50||Ditto Gold. Looks like more trade confined to 28.40/2.80 ahead.|
|Res||90.85||91.10||92.75||Oil got down to 89.33 before a nice bounce allowing short term traders to buy the dip, as we discussed yesterday. The short term looks as though we may get a bit more upside, althoguh if we see 91.30/80 again, medium term sellers will line up, looking for the next leg to the downside.|
Poor Consumer Sentiment from the EU today fed expectations of a potential ECB rate cut, the likelihood of a dovish tone from Mr Monti at the Press Conference on Thursday, and kept pressure on the Euro. This came on top of the deadlock on the political situation in Italy which has given rise to the chances of another election sooner rather than later.
While the Euro does look soft, it has held on above last Friday’s lows and has spent the session not too far from 1.3000, although it looks mildly bid going into the NY close, and technically little has changed.
On the topside today’s high has been 1.3030 and given the nearby descending trendline, if we go above this, we may now see a bit more of a short squeeze that would take us up to 1.3070. Above here, the 100 DMA is at 1.3120, while the top of the channel is now at 1.3240. In the short term the 4 hour charts are showing some mild bullish divergence, which should give us better levels to sell into, in looking for the greater move to the downside towards the medium term Head/Shoulder objective at 1.2840, and so a return towards 1.3100 would not surprise before we head lower.
On the downside, below today’s low would find bids at Fridays base at 1.2965. The channel base is now at 1.2908, which ties in with the 76.4% Fibo support of 1.2660/1.3710. Below this lies 1.2875 (50% of 1.2042/1.3710) ahead of the H/S objective at 1.2840 which is backed up by the 200 DMA at 1.2830 (purple line), so the support in the 1.2830/75 area is going to be strong and would suggest a good area to buy back some shorts.
Today looks to me as though we could see a bit of a repeat of yesterday, although the short term charts do have some mild positive momentum and a move up towards 1.3070/1.3100 would not surprise before another attempt at lower levels. Use 1.2970/1.3070 as a guide.
Economic data highlights will include:
T: EU Services PMI, Retail Sales, US ISM Non Mfg PMI..
The dollar halted at the Fibo resistance on Monday and retreated a little, as the Yen held its ground despite Kuroda’s comments at his confirmation as BOJ Governor, that he would throw everything at his disposal to expand the economy, including the purchase of longer term bonds, which saw 30year JGBs hit a 2 1/2 year low at 1.7%.
So the Yen has firmed a little but overall it has been pretty much a sideways session, with the dollar holding on above 93.05 support.
I suspect we are in for some more choppy trade as the daily charts continue to unwind and ahead of Thursday BOJ meeting it looks possible that we will stay within the recent 92.50/94.00 range, with the shorter term indicators hinting at the chance of some mild downside pressure. In the short term minor support is at 93.05 and at 92.50, although this may be a stretch too far today.
A return to, and break of 93.70, would suggest further progress towards major Fibo resistance at 94.03 (38.2% of 124.13/75.56 – see daily chart from yesterdays outlook) and then to 94.48 (25 Feb high) and eventually towards the important 94.97 May 2010 high.
Today look for 93.00/94.00 as a guide, with a mild negative short term bias but with a view to buying the dips for an eventual test of 94.00 and above.
Despite the very poor UK Construction PMI, which came in at 46.8, – against expectations of a reading of 49 -, Cable held its ground today and has squeezed slowly higher, from a session low of 1.4999 to a high of 1.5116. It currently sits near the highs and the bullish divergence on the 4 hour charts combined with the positive momentum suggests that we might have a short term bottom in place at Fridays 1.4985 low.
A sustained break of 1.5100 would suggest a further squeeze towards 1.5182 (23.6% of 1.6379/1.4985), beyond which 1.5215 would see good sellers.
A turn back lower would suggest a return to 1.5000 and 1.4985, although I don’t think this is likely in the next couple of days, or indeed probably before the BOE meeting on Thursday. If wrong, further declines would take Cable down towards 1.4947 the July 2010 low and possibly towards the Feb 2010 low at 1.4782.
Today it looks as though dips towards 1.5150 may be short term buying opportunities for a test of 1.5150/80 before the chances of another test of the downside.
The dailies have moved down aggressively lower recently but are now oversold and look as though they may be flattening out a little, so for the time being I am now not so sure that it would pay to be too bearish back below 1.5000. The weekly channel base (see yesterdays outlook/chart), as pointed out yesterday may yet provide a major level of support.
Economic data highlights will include:
The dollar has spent the day consolidating below Fridays high in a very quiet 30 point trading range.
There is nothing to add to yesterdays report and the 200 DMA at 0.9430 provides the first hurdle ahead of Fridays 0.9462 high. Above that lies the channel top at 0.9511 which coincides with the 13 Nov 12 high, and thus should prove strong resistance..
On the downside, 0.9400 and 0.9385 (both minor) should both see bids, below which lies the more important 0.9335 area but which looks doubtful today.
The 4 hour and daily momentum indicators are mixed and while the short term bias looks likely to head a little lower, dips should find support for an eventual test of the channel top.
The move by China to reign in property speculation sent the Shanghai Composite Index reeling yesterday which quickly flowed through to the Aud, and this, coupled with the generally soft Australian data kept the pressure on the downside for much of the session, before bottoming out at 1.0115 in very early European trade. Ithas since spent its time squeezing slowly back up towards the previous support at 1.0180 and late in the NY session has accelerated to a high so far of 1.0197.
Ahead of the RBA meeting today I would imagine that the Aud will retain the underlying bid tone, given that rates are expected to stay on hold. If this turns out to be the case, we could see further gains towards the Fibo resistance at 1.0222 (23.6% of 1.0577/1.0115). Beyond that, 1.0250 and 1.0275 would see plenty of keen sellers and I would be doubtful of heading to much further than that for the time being.
A turn lower, which looks less likely in the coming session, would now see minor bids at 1.0150 ahead of 1.0115. Below this, there is good support at 1.0100, with a potential channel base at around 1.0080.
The Asian market may be a bit short after yesterday’s session and thus dips today should see some keen buyers, but it will all come down to the RBA, and assuming no rate cut, I would think we could see the Aud trade up to 1.02+, at which point further sellers would enter the market looking for the next medium term leg to the downside. Keep an eye out for the tone of the statement following the decision. A cautious tone on global growth seems most likely and may hinder further upside progress for the Aud and would see fresh sellers emerge.
Aside from the RBA we also get a fair bit of other data which all need to be added into the mix so stay flexible.
Economic data highlights will include:
AIG Services Index, Current Acc, Retail Sales, HSBC China Services PMI, RBA I/R Decision
As with the Aud, the Kiwi was under pressure for much of the day yesterday following the word that China will act on Chinese property speculation but has since recovered its lost ground and is now at session highs.
It looks like a false break on the downside of the channel and the minor momentum appears to point a little bit higher. The Kiwi will be somewhat influenced today by cross flows in AUDNZD following the RBA decision, but it looks as though a test of resistance at 0.8280 and possibly 0.8300 could lie ahead. Beyond that, 0.8320 would see sellers but maybe a stretch to far today.
The downside looks to have support at 0.8225 and then at the session low at 0.8192. Below this leads towards strong support in the 0.8150 area, being 61.8% of 0.7923/0.8533 and the 26 Dec ’12 low being at 0.8154. Back up support is conveniently provided by the 200 DMA at 0.8148, but looks unlikely in the next few sessions.
Today looks for 0.8225/0.8300 to cover it.