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AUD has a great start to 2017

Market Analysis

AUDCHF, Daily             

The dollar came off the boil after logging 14-year highs yesterday, by the measure of its narrow trade-weighted gauge. USDJPY settled in a narrow orbit of 118.00 logged after yesterday logging high of 118.61, which was five pips shy of the trend peak. Japanese markets reopened, and stock markets there roared, with the Nikkei 225 surging 2.5%, partly on catch up and partly in rapture of the weaker yen. EURUSD settled around 1.0400 after yesterday posting a trend low at 1.0340. Talk of the pair reaching parity is widespread, although recent encouraging data and perky inflation figures out of the Eurozone may be sowing some seeds of doubt among bearish market participants. The dollar bloc currencies continued to trade firmly, buoyed by firm global equity markets and commodity prices. AUDUSD edged out a two-week peak of 0.7245, while the NZ dollar lifted after underperforming yesterday.

The AUD was the star performer as New York and London re-opened after the New Year holiday. Two AUD positions were taken last night on the close of the Daily candle.  Long  AUDCHF, and Short GBPAUD.

AUDCHF – the pair have been in a trading range between 0.7600 and 0.7350 since July 2016.  The spike down on Friday below 0.7300 seems to have been a bit of an outlier as a year-end shake out.  2017’s kick off rally attracted my interest yesterday and a LONG position was opened on last nights close at 0.7411. This level is the 38.2 Fibonacci retracement from the recent December high at 0.7624.  Target 1 at 0.7490 is the confluence of the 61.8 Golden Ratio Fibonacci level, the 50 DMA.  The first resistance area will be the 20 DMA, 50.0 Fibonacci level and psychological 0.7450 level.  The longer term Monthly resistance is around 0.7530, with target 2 a little short of the top of the trading range at 0.7580.

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GBPAUD – The AUD has benefited from the rise in Gold prices in that last few sessions and doubts continue to hang on the GBP thanks to the economic and political uncertainty that clouds the Brexit negotiations. Yesterday the UK’s EU Ambassador resigned and in his resignation letter (obtained today by the BBC) he called colleagues to challenge “muddled thinking” over Brexit. “I hope you will continue to challenge ill-founded arguments and muddled thinking and that you will never be afraid to speak the truth to those in power.

“I hope that you will support each other in those difficult moments where you have to deliver messages that are disagreeable to those who need to hear them.” . Technically the pair has rallied into resistance at 1.7170 a number of times recently only to be rejected each time. The tall up wick and near Shooting star candle on Monday, followed by a switch in the Parabolic SAR and break of the 38.2 Fibonacci level and 20 DMA yesterday triggered an entry at 1.6945.  Target 1 is at the 20 DMA and 14DATR level at 1.6815, Target 2 is 1.6600 a key psychological level, 50.0 Fibonacci level and previous support area.

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Stuart Cowell

Market Analyst

HotForex

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