We finally took out 0.93 overnight, but the move was data based and so the sellers soon came steam rolling in on the poor China PMI. The top came at the broken Sep 2011/June 2013 support line at 0.9320.
The move has been mainly aussie based rather than dollar based as the euro and pound are also up along side USD/JPY. So the other side of the coin has been EUR/AUD which has been up over 200 pips since the overnight lows.
The 55 H4ma has halted the slide so far at 0.9189 and the 100 H4ma is just below at 0.9165. Under that is the broken May channel top at 0.9133.
While the CPI release took some ammo from the rate cut brigade the Chinese data trumped all and that will be the biggest weight on the pair. This is why we’re seeing further moves out of AUD, particularly in EUR/AUD. Chinese negativity will have an effect on the economy that rate cuts may not be able to help.
As such the flows are going to increase out of the aussie like we are seeing in the euro.
The euro found support on the spike down and bottomed at 1.4183. The bounce then took out most of the shorter time-framed tech resistance but found the big figure at 1.44 to much to take on and we’ve slipped back to 1.4357.
This level is quite important as we approach the end of the month as the 55 mma is bang on this number. A monthly close above will be very positive for the pair and the previous highs (listed on the chart below) will be in danger of getting smoked pretty easily.
In amongst the previous highs, the next technical resistance is strong resistance at 1.4435, then 1.4550 while below support is seen at 1.4277 (55 H4ma), 1.4209 (100h4ma). Strong support comes in at 1.4183 then 1.4157 and 1.4107.
We’re still not far from the big 0.90 level in AUD/USD and the fact we can’t get away from it would suggest that we may take another look down there in the next few weeks. EUR/AUD remains strong and a good dip buying opportunity, particularly down to 1.4180.
For its faults AUD/USD still looks a decent buy down near 0.90 with a stop reverse on a break of 0.8985/90. If I got long there I would still be looking to offload any them around 0.9250 or 0.93 as I still feel the long term picture is still very bearish. The 0.90 levels is the USD/JPY equivalent of the 100 level so a break could see the move to mid-low 0.80’s come very quickly.