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Greenback strength dominates FX

The greenback extended its gains with the US dollar index rising to a one month high.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
USD
Source: Bloomberg

Data that was mostly better than expected - including new home sales, Richmond manufacturing index and the Case Shiller index - encouraged buyers. Durable goods orders were in line with expectations but the core capex component was up a better than expected 1%.

USD/JPY

All the majors lost ground to the greenback including the euro, yen and AUD. USD/JPY finally breached the ¥122.00 barrier and ran to a high of ¥123.33. The pair is still holding its ground in the ¥123.00 region and I feel the next key level to look out for will be around 124.26 which is where 2007 highs lie. The 122.00 level has now turned into near term support and I would be eyeing buying opportunities in that region. On the calendar today we have the Bank of Japan’s monetary policy meeting minutes.

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AUD/USD

It’s hard to go past the trend on this one, which can be seen defined by the 5-day moving average (blue line) on this daily chart. There is a good chance the pair goes lower from here despite a nice move back above $60/t for iron ore, although my absolute preference would be to sell rallies into $0.7770 to $0.7780.

There is a well pronounced channel here and I am keen to align my view with the trend. Rallies should be contained below the May 5 low of $0.7786 and I think the bulls would want to see a move back through yesterday’s high of $0.7839 before entering fresh longs with any conviction.

Momentum and trend oscillators are also on a weakening trend and feed into the idea that rallies should be sold. Clearly the key target is the series of lows in March/April, although a break here would be outright bearish and actually suggest adding to the short position.

Will have to hear what RBA Lowe says at 10:45am (not expecting too much here), but there could the prospect of low volatility today in Asia and the pair may creep up a touch if Lowe doesn’t provide any fresh jawboning.

Bear in mind this move lower has been predominately a USD move rather than a bearish AUD story.

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CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.