Aussie surges to near record as dollar losses steepen

The greenback continued to fall against all its major counterparts in the overnight sessions, with the Aussie topping the performance charts, advancing more than 0.90% at the open of North American trade. Comments made by central bank governor Glenn Stevens cited a more upbeat outlook for the continent-nation noting that household spending is likely to rebound “at some point” as consumer confidence improves. He stated that, “As a better sense of the degree of persistence is gained, people will probably be more confident to spend than perhaps they are just now.” The general optimistic tone struck by the RBA governor supported the Aussie which briefly topped the 50% Fibonacci extension taken from the July 18th and 25th troughs at 1.0950 before paring some of the gains early in US trade. A daily chart shows the pair breaching the key 38.2% Fibonacci extension at 1.0880 and suggests the Aussie may have further gains in store. Risk to the recent advance comes overnight with the 2Q CPI data. Consensus estimates call for a headline print of 3.4% y/y, up from the previous read of 3.3% y/y. A weaker than expected read could see interest rate expectations fall further with Credit Suisse overnight swaps already factoring in more than 40 basis points in rate cuts for the next twelve months.

Interim support for the AUD/USD holds at the 38.2% Fibonacci extension at 1.0915 with subsequent floors seen at the 23.6% extension at 1.0870 and 1.0840. Topside targets are eyed at 1.0965 backed by the 61.8% extension at 1.0990 and 1.0120.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

1.0660

20-Day SMA

1.0739

10-Day SMA

1.0770

2011 AUD High

1.1010

The yen saw the smallest advance against the greenback as speculation of a possible Bank of Japan currency intervention has traders reluctant to lift the yen too high too quickly. Price volatility overnight saw the pair spike nearly 100 pips after dipping to its lowest level since the March 16th lows set after the disasters. There have been no signs of intervention however and comments made by the Japanese Finance Minister Yoshihiko Noda confirmed the central bank had not moved on currency markets. Nonetheless, the yen remains firmer against the greenback as the pair continues to hold above interim support at the 78-handle. Interim resistance holds just above at the 38.2% Fibonacci extension taken from the July 8th and 19th crests at 78.20, backed by 78.40 and the 23.6% extension at 78.60. A break below interim support sees targets at the 50% Fibonacci extension at 77.80 with subsequent floors eyed at the lower bound trendline support of the descending channel, and the 61.8% extension at 77.50.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

80.34

20-Day SMA

79.66

10-Day SMA

78.70

2011 JPY High

76.35

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.

Twitter: @MBForex
WEB:
www.fxcm.com

About the Author
Michael Boutros Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.
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