Aussie rally to offer favorable entries

July 10, 2012 05:26 AM
DailyFX forex winners and losers

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The Australian dollar is the top performer ahead of the US open with an advance of 0.17% on the session. Risk appetite is on the rebound in European trade with equity markets in the black across the board after EU leaders announced they would give Spain an extra year to achieve its 3% budget deficit target while granting access to up to €30 billion in funding to the banking sector by the end of the month. The news temporarily alleviated concerns over a banking crisis in Spain and offset disappointing trade data out of China in the overnight session.

The AUD/USD continues to hold within the confines of an ascending channel formation with the pair failing an attempted breach above the 100-day moving average at 1.0245. Subsequent daily resistance targets are seen just above at the 200-day moving average at 1.0270 and the 50% Fibonacci extension taken from the June 1st and 25th troughs at 1.0290. We maintain our bearish outlook with only a breach above the monthly highs at 1.0330 invalidating this particular trade setup. A break below channel support eyes immediate targets at former January lows at 1.0146 with a break below the 23.6% extension at 1.0120 offering further conviction on our directional bias.

The scalp chart shows the AUD/USD holding just above the 38.2% extension at 1.0215 with a break below this level eyeing subsequent support targets at 1.0180, 1.0155 and the 23.6% extension at 1.0120. Soft interim resistance stands at 1.0235 backed by 1.0260 and the 50% extension at 1.0290. Note that RSI is now attempting a break below the 60-mark with such a scenario offering further conviction on intra-day aussie short scalps.

Key Levels/Indicators

Level/Indicator

Level

200-Day SMA

1.0271

100-Day SMA

1.0246

50-Day SMA

1.0013

2012 AUD HIGH

1.0858

The euro is the weakest performer in late European trade with a loss of 0.21% on the session. The EURUSD now rests just above our initial monthly objective at the 50% Fibonacci extension taken from the May 1st and June 18th crests at 1.2250. The move off the June 18th high represents wave 5 of a 3 with a break below 1.0250 eyeing the key 61.8% extension at 1.2130. Interim daily resistance stands with the 38.2% extension at 1.2365 and is backed by soft resistance at 1.2435. We maintain our bearish outlook on the single currency with rallies offering favorable short-entries. Note that daily RSI has continued to hold below the 40-mark with a breach above risking a more substantial correction before moving lower.

The scalp chart shows the EURUSD holding just above interim support at the 123.6% Fibonacci extension taken from the June 17th and 29th crests at 1.2270. A break below this mark eyes subsequent floors at 1.2250 and the 138.2% extension at 1.2208 with key support seen at the 61.8% extension at 1.2140. Soft interim resistance stands at 1.2310 backed by the 100% extension at 1.2350, 1.2370, and the 1.24-handle. A breach above the 78.6% extension at 1.2425 invalidates intra-day shorts with such a scenario likely to see a more substantial rally before continuing lower. Note that RSI is now poised for a break below the 30-mark, with such a scenario offering further conviction on intra-day short scalps.

Key Levels/Indicators

Level/Indicator

Level

200-Day SMA

1.3113

100-Day SMA

1.2918

50-Day SMA

1.2626

2012 EUR LOW

1.2255

 

About the Author

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.DailyFX.com