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07 September 2010

Veksler's Forex Blog: Australia forms minority government

Ken Veksler, Senior Manager, Trading Advisory, Saxo Bank

With the US out of action overnight, the session (as you can imagine) was less than stellar as far as price action and general developments.

Of note however were the 2 central bank meetings overnight which both yielded a no change result in Japan and Australia. The rhetoric out of Japan was practically nonexistent, while the Australians (for the first time mind you) drew a direct correlation to the potential (much anticipated on my part at least) slow down in China which for those out there that weren’t sure would put Australia back into the dark ages in the context of the current global climate. More interestingly though we finally had confirmation that Australia has now formed a new minority government with Julia Gillard (Labor leader) the new Prime Minister. As with the UK election earlier this year and finality to the 2 weeks of confusion has given the local currency a shot in the arm and we remain well bid in that particular antipodean cross.

The data slate today is as light as it was yesterday so little by way of market moving headlines expected. On the currency front expect some fresh position taking over the coming days, as the new month starts in earnest and perhaps more importantly we see traders coming back from what felt like the longest summer holiday break ever.

On the crosses….

Looking first at the Cable, we’re trading rather soft here and there seems to be an overall market sentiment that this thing in the coming days will indeed head lower and heavily so. Tom however like a few out there is playing a hesitant contrarian, in that he says he’s bidding the Cable into 1.5400 on the day as a pure speculative play looking for one last gasp move higher into 1.5460/70. I like Tom, but I don’t always like his ideas and today is the proof in the pudding, there is a chance that he like all his mates will get stopped out on an ugly clean out which should find a final measure of support around the 1.5350 area.

In the EURUSD we seem to have identified a short term resistance zone in and around the 1.3030 area and for now we consolidate recent strength. Ranges and levels that made sense yesterday are still in play today, save for the fact that we’re a little better offered first thing this morning. Good bids are said to be sitting in and around the 1.2750/60 zone with stops just below.

The AUDUSD as per the news above is still looking healthy, but vulnerable. While we remain above the 0.9080 level (only a breach and daily close below confirms more downside) this puppy looks like it should be having another run at the 0.9200/30 area where some good offers are already lined up.

USDCAD…. Read yesterdays comment…. The BoC statement tomorrow the only thing that could shake things up a bit.

And finally, the CHFJPY… if you like clearly defined ranges and making money, it might be worth while looking at the daily and 4 hour charts for this cross. Good offers at 83.30/40 and equally good bids at 82.75. The rest I will let you extrapolate.