The AUD has finally lost its grip after breaking a key uptrend support line yesterday. This uptrend had held since February and a break could signal more downside to come. The pair traded to a low of 0.924 and the next key support line is at 0.92. While we might see a temporary halt in the slide at that level, I feel strength will now be used by traders as an opportunity to sell. On the calendar today we have Westpac consumer sentiment and wage price index data due out. Any further signs of economic weakness could strain the AUD further.
Yen strength seems to be back on the cards and this will keep the Nikkei under pressure in the near term. With USD/JPY continuing to test this week’s lows, the Nikkei is set to open below 14,000 today. This is a psychological dent to confidence and it will be interesting to see how the BoJ responds to the recent weakness when it concludes its meeting today.
Sterling hasn’t done much this week but might be in for some volatility today with BoE minutes and UK retail sales due out. April retail sales are expected to show a 0.4% rise which would confirm that the strong pace of the recovery remains on track. While Mark Carney recently alluded to the fact that they are in no rush to raise rates, any positive data would raise eyebrows and could push the pair higher.
The stock broke below $1 this week and could continue slumping as iron ore prices extend losses below $100. My preferred strategy on the trade would be to a momentum play with stops relatively tight just above $1. A short term downtrend has also formed from February highs and this is likely to cap any recovery in the near term.