Morning Report: China RRR Cut Supports AUD In Quiet Trading

KEY DATA RELEASES TODAY (BST) :

No Key Data Today

OVERNIGHT:

Benefiting from the USD weakness, the EUR has had its best week in a month despite growing concerns on Greece’s debt crisis. The European Central Bank is concerned if Greece runs out of money and starts paying civil servants with IOU’s, creating a virtual second currency in euro zone. Expectations of a swift EURUSD sell off following G20 communiqué over the weekend appeared to be relatively short­ lived as the pair transpires to be in consolidation mode in this morning’s after a lacklustre Asian session following last week’s break and positional adjustment to the topside. From here 1.0850­80 area acting as key resistance level. To the downside short term support comes in at 1.0760 followed by key level at 1.0660.Little in way of economic data releases today.

USDJPY has had five straight sessions now of lower highs/lower lows… Technically the pair remains magnetized by 119.95 (the level where the pair closed on Friday as well). 118.50 is the support level to watch now on the downside, where a break below could see a move towards 118. Players prefer buying dips, respecting the broad 118­/122 range, and given the US CPI showing signs of stability, risk­ positive developments over the weekend, If carry remains a popular strategy, cross JPY demand should also keep the pair supported.

UK employment data on Friday was strong enough to generate further buying interest, but the GBPUSD was capped at the 1.5050 resistance level. This week, we get the BOE minutes as the main domestic risk to watch… anticipate the tone to reflect continued concern over the strong currency.

PRICE ACTION OVERVIEW:

EUR: Above 1.0860 refocuses on fourth 1.10 test, 10730 key intraday support ahead of medium  term 1.0620
GBP: Daily close above 1.50 energises bulls, while this area caps expect consolidation, below 1.4840 revives bearish bias
JPY:  While 118.30 contains downside target 121.00 en route to retest of year to date highs, only below 118.30 concerns bullish view
CAD: 123.50 former support now becomes key resistance second close below here forewarns further downside
AUD:  While .7860/80 contains upside anticipate third test of key .7550 failure here opens the  bearish target of .72, above .7880 alleviates downside pressure

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDNeutral Await new signal
GBPUSDNeutralAwait new signal
USDJPYNeutral Await new signal
USDCADNeutral Await new signal
AUDUSDNeutralAwait new signal

ANALYSIS:

EURUSD Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBearish

  • While 1.0730 supports on the downside anticipate further upside development testing 1.09 offers, close above 1.09 opens fourth test and likely reclaim of the 1.10 handle in broader phase of correction. Only below 1.07 reinvigorates intra day bearish bias
  • Order Flow indicators; OBV off lows, Linear Regression and Psychology bullish but stalling at elevated levels
  • Monitor price action and Order Flow for shorts positions targeting 1.0460 initially and 1.0240

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GBPUSD: Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBearish

  • Last weeks double bottom has prompted a a sharp correction off the lows 1.50 is the key near term hurdle on a closing basis, a close above 1.51 would suggest a medium term reversal. Intraday below 1.4840 suggests bears have the ball again.
  • Order Flow indicators; OBV continues to tick higher, Linear Regression and Psychology bullish
  • Monitoring price action and Order Flow for shorts targeting 1.45 initially and 1.42 in extension

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USDJPY: Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBullish
  • Key 118.30 near term support under threat a failure here will open up and equality corrective objective towards 117 and the lower end of the four month range. A breakdown through 115.50 would suggest a more significant top has been made.
  • Order Flow indicators; OBV ticking down, Linear Regression and Psychology bearish
  • Monitoring price action and Order Flow indicators for longs targeting 124

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USDCAD: Short Term (1-3 Days): Neutral  – Medium Term (1-3 Weeks) Bullish

  • 123 gives way suggesting a broader corrective phase, 124.50 becomes near term resistance, a close above here will re energise bullish bias, below 120 opens 117.50 and forewarns a more significant top in place.
  • Daily Order Flow indicators; OBV consolidates off highs, Linear Regression and Psychology bearish
  • Monitoring price action and Order Flow indicators to reset long positions targeting 1.30

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AUDUSDShort Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBearish

  • .7550 is now key support bulls set to challenge the .79 which has defined range resistance since February a break here target .8050 next.
  • Order Flow indicators; OBV consolidating recent gains, Linear Regression bullish but stalling, Psychology bullish.
  • Monitoring price action and Order Flow indicators to set shorts targeting .72 against .8050

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