RBA’s Stevens Sinks Aussie With Comments, US Dollar Gains

A quite unremarkable day today at first glance has presented some interesting developments. US data was terrible with Pending Homes Sales well below expectations at -5.6% yet the USD% index rallied even though EUR/USD is refusing to break meaningfully lower. Also of interest was the speech by RBA governor Stevens, in which he succeeded in portraying a very gloomy outlook for the Australian economy and managed to talk down a decent drop in AUDUSD to bring things more in line with the impressive fall seen by the New Zealand Dollar recently.

Everything seems to be winding up towards the FOMC meeting on the 30th although any taper at the meeting would really catch the market off guard and few expect anything but a confirmation that the Fed will delay their taper of asset purchases until much later. Goldman speculated a March 2014 taper date, which seems a reasonable guess given the poor non-farms last time.

USD% Index

Still displaying quite marked bullish RSI divergence beginning to slowly to pick it’s self up off the bottom of the bearish channel, The USD% index seems to be consolidating it’s recent bearishness having met the 100% fib expansion and could push higher within it’s wide bearish channel before a continuation lower. While now a buy-the-dips, the slight deterioration in correlation between some major pairs like EUR/USD , GBPUSD and USD/CHF could see some spikes lower before a medium term reversal, however these should be good dollar buying opportunities. FOMC remains a risk event but likely uneventful.

I am bullish USD

USD% Index Resistance (EUR/USD support): EUR/USD 1.3740, 1.3700
USD% Index Support (EUR/USD support): EUR/USD 1.3827, 1.3840, 1.3864

EUR% Index

The recent messy push through the 100% fib expansion could see a slight continuation higher to meet the upper bounds of the bullish channel before a reversal, but the Euro is currently quite overbought and this may mean a bout of profit taking to correct the recent excess of bullishness. Today’s price action failed to print a fresh high which could signal a weakening of trend. Negative Dollar sentiment may eventually allow for a continuation higher in the medium term, most likely from the bottom the current bullish channel but a retracement seems likely in the short to medium term. I bearish EUR%

EUR% Index Resistance: EUR/USD 1.3800, 1.3850, 1.3876
EUR% Index Support: EUR/USD 1.3716, 1.3660

EUR/USD Trade Positioning

Short from 1.3785, stops at 1,3944

JPY% Index

With bullish support now broken via the opening gap we could see a further drop lower to aid Dollar bullishness for the time being. Overall, the Yen remains quite directionless and is still trading within the quite wide range dictated by.August and September’s price action. Without a catalyst from Japan in terms of definite economic improvement or an alteration to the stimulus program, this may be the range for JPY until the Fed finally taper. I am bearish JPY

JPY% Index Resistance (USD/JPY Support): USD/JPY 97.30, 96.87
JPY% Index Support (USD/JPY Resistance): USD/JPY 98.00, 98.38

USD/JPY Trade Positioning

Long from 97.35 , Stops at 95.77

GBP% Index

The Pound’s choppy consolidation is gradually pushing it through the bullish support which has defined it’s up trend, as such we seem likely to find ourselves having broken trend fairly soon. EURGBP remains bullish, which should again weaken the pound in the event of any dollar strength. Recent data has been mixed, but last week’s on target positive print for the GDP numbers failed to cause a rally, which again reaffirms the pound’s inability to push higher given the current market conditions. Still displaying what could turn out to be quite a messy head and shoulders formation a break below 1.6050 is need to confirm GBP bearishness in the medium term. I am bearish GBP

GBP% Index Resistance: GBP/USD 1.6215, 1.6318, 1.6378
GBP% Index Support: GBP/USD 1.6091, 1.6039

GBPUSDTrade Positioning

Short from 1.6182, stops at 1,6198

AUD% Index

Having broken bullish trend last week, the AUD% index seems likely to push lower, with Steven’s speech helping some shorts to enter the market in anticipation for further rate cut speculation, especially given Steven’s comment regarding wanting the Fed’s taper to help lower the Aussie and the current expectation that this may be some way off, again fuelling expectation of some sold action from the RBA to lower the Australian Dollar. Technically, we have now broken through the 38.2% fib expansion support of the recent rally and now have limited support until quite a bit lower if we see a continuation of this bearish move. I remain bearish AUD

AUD% Index Resistance: AUD/USD 0.9554, 0.9600, 0.9609
AUD% Index Support: AUD/USD 0.9514, 0.9500

AUD/USD Trade Positioning

Short from 0.9623, stops at 0.9778

NZD/USD Trade Positioning

Short from 0.8414, stops at 0.8580

CHF% Index

Still yet to meet the 200% Fib expansion, the CHF% index’s strength seems to be diminishing but a push higher to meet these significant levels can not be ruled out, especially considering the potential for FOMC volatility.The index remains in a wide bullish channel and is still one of the stronger major currencies at the moment, but has begun to stall, indicating that the trend is tiring somewhat and could begin to consolidate and drop lower in the medium term. We now sit at some strong support so the reaction to this level once traders start their day tomorrow will be important.

I am bearish CHF

CHF% Index Resistance (USD/CHF support): USD/CHF 0.8921, 0.8878
CHF% Index Support (USD/CHF resistance): USD/CHF 0.8957, 0.8989, 0.9000