AUD/USD printed a textbook bearish reversal at the trend highs (i.e. trading above Tuesday’s high, but closing below Tuesdays days low), with the pair finding solid selling activity at the 200-day moving average. Trend support comes in at 0.9600, so it will be interesting to see if the pair can find support here or whether an actual reversal plays out. At 12:45 we get the HSBC ‘flash’ PMI print and the market anticipates the pace of expansion to pick up, with the index expected at 50.4. A weak number could confirm the reversal.
I had been looking at shorts of late, but as I said in my afternoon note on Tuesday I have taken profit on EUR/AUD shorts and moved to the sidelines. If anything the pair looks like it could actually go higher from here after the sizeable bullish reversal seen on the daily chart. Despite the higher Aussie CPI yesterday the market is more focused on the Chinese money market rates which spiked yesterday due to the slight tightening of liquidity conditions. In European trade we get both German and European composite manufacturing and services and both data points are expected to be revised up slightly; again this could support the EUR. Otherwise, traders will be eyeing Chinese money market rates (Shibor) and Chinese equities.
After hitting a high of $32.40, ANZ closed below Tuesday’s low, printing a bearish reversal at the all-time highs. This could be very interesting indeed and we will need confirmation of the reversal today, with lower low. However, traders will be asking is the uptrend over?
The Japanese equity market performed a key day reversal, like many other assets, and could see follow-through selling on the open. At 10:50 we get the weekly MoF fund flows and traders will be keen to see if domestic players look to buy foreign assets, which is seen as a JPY negative and thus a positive for the Nikkei. USD/JPY will be interesting today, with the pair testing the 200-day moving average at 97.28. This has been big support recently and a break could see the pair head to 96.00.
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