The pair is in a short-term uptrend and yesterday broke and closed above the March 14 downtrend. Having closed at 1.1600, the pair moved through previous supply at 1.1593 (the August 26 high) and could continue to squeeze up to the top of the daily ichimoku cloud at 1.1650. At 11:30 we get the latest Australian trade balance and the market expects a narrowing of this deficit to $100 million.
Traders are selling EURs and buying AUDs given the more positive feel towards China and global growth in general. We have also seen the swaps market now pricing in rate hikes in Australia for the first time since 2011, although we still see a possibility of a November cut if we get further poor employment and inflation data in the coming months. Technically the pair has broken some key levels to the downside and we’d continue to expect momentum to favour downside moves, with 1.3957 (the 38% retracement of the April to August rally) the longer-term target. At 20:00 tonight we get German factory orders, while at 21:45 we get the ECB meeting and press conference shortly after.
We highlighted this pair recently and price action continues to look constructive for AUD longs. AUD/JPY has broken all short-term moving averages and has broken into the daily ichimoku cloud for the first time in months. Effectively the MACD is still below zero, however it is threatening to break above in which case could bring out more technical buyers, with the July 9 high at 93.07 a potential target, ahead of the top of the cloud at 94.09. In afternoon trade (no set time) we get the BoJ meeting; the while no change is expected in the bank asset purchase programme, we could see a change in the bank’s economic projections. The market will also be keen to hear more about the impending sales tax and whether the BoJ plans to offset the fiscal tightening with further easing of monetary conditions.
We highlighted gold in our ‘one to watch’ this week after the metal closed below the uptrend drawn from the August 7 low at $1400. Gold seems to be finding good buying activity on moves to $1384, where it has moved higher in the last two sessions. In US trade tonight we get the latest US ADP private payrolls report, with the market expecting 180,000 jobs to be created, while the weekly jobless claims are also in focus.
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