Bobbys Corner-Open Market-March.20.2012

Good Morning:

BHP Billiton (the world’s largest mining company), commented today that they may be scaling back some of their projects, as they see China’s demand for iron ore decrease due to a slow down in the overall Chinese economy.  The comments rattled the markets on fears that the Chinese economy is slowing down at a faster pace than was originally believed.
Also rumors of a coup in Beijing did not help the already nervous markets.
On the heels of these comments and rumors-the markets slammed AUD/USD.

In US political news-Republicans will go to Illinois today for another primary-and Mitt Romney will be looking to add to his delegate numbers. 

World indexes were all lower- only the Nikkei posted positive numbers.  US Futures are also lower.

Oil is slightly lower-with WTI trading above $107/bbl.

HAVE A GREAT DAY & GOOD LUCK

Aussie Above Trendline

The AUDUSD pair broke above 6 month old trendline resistance, but has lost its bid at the 76.4% of the October to November move.

AUDUSD Touches Trendline Resistance

The AUDUSD pair had touched 6 month old trendline resistance helped by a better than expected GDP reading out of China and a well subscribed Spanish bond auction. On the chart below we see the wedge closing with steep trendline support and the trending 21 day mavg crossing above the 100day, a break above could quickly lead toward the October highs in the middle of the 1.07 handle.

HIA New Home Sales

HIA New Home Sales for Aussie in November rose by 6.8% from a 5.5% increase the prior month. The AUDUSD pair moved back to the 1.02 handle following the improved, however back dated release. On the chart below we see the pair found seems to be finding some support for now at the 100 day mavg and the old 50% level of the October to November move.

AUDUSD With Downward Potential

The AUDUSD pair has seen the longer-term moving averages turn negative and now 4-21 looks to break below 4-200. The pair has been trapped in December between the 61.8% that’s resisted the pair and the 38.2% that has provided a bid. The markets do not seem encouraged by the developments in Europe over the weekend and any risk off momentum should be reflected in the price of the Aussie with test of the 4-100hr (around par) and possibly the trendline support before year-end.

AUDUSD tests 100 hour MA and finds sellers

The AUDUSD has seen a move higher this morning on the rebound in the EURUSD. The pair has been in a trend move to the downside since a correction peak on November 14th. The move down tested the 100 hour MA four or so times (see blue line) there has not been a sustainable move above this MA line (blue line in the chart above).  The test today at the 0.9768 level is another attempt to show some bullish momentum.

I would expect that there would be profit takers on the first test.  A move above should lead to some further buying but I would expect the market to be more in a consoldation/corrective mode.  With the expectations of slower global growth and China this week having their PMI moving below the 50 level, there should be continued talk of lower rates in Australia.  This should keep the market focused on selling rallies, rather than buying dips.

On the downside today, the 38.2% of the move higher today comes in at the 0.97264 level.  Traders will be watching this level to see if buyers re-emerge at this level. If so, there could be some further short covering into the weekend.

AUD/USD Tentatively Respects Parity

AUD/USD (daily chart) as of Tuesday (10/11/2011) has tentatively respected key resistance around parity (1.0000), turning down in trading on Tuesday after rising just a few pips above the parity level. This occurs after five straight days of net bullish price action that saw price rise steeply from its 0.9400 support level. Despite these past five days of bullishness, the pair still resides within a strong downtrend, although any subsequent breakout above parity could potentially place this bearish trend in jeopardy, and would then target key upside resistance around the 1.0200 price region once again. If price continues to respect parity within the context of the current bearish trend, price should initially re-target downside support around the 0.9700 price region.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education
FXDD

AUD/USD Drops to Key Support Target, Continued Bearish Bias

AUD/USD (daily chart) as of Tuesday (10/04/2011) has dropped down to a key support target in the 0.9400 price region after five consecutive bearish days that brought the pair plummeting down from its correction highs near parity (1.0000). This occurs within the context of an exceptionally steep downtrend that initiated from the 1.0760 high in the beginning of September. The fall from that high around a month ago broke down below a large rising wedge pattern, and then successive key support levels, including 1.0400, 1.0200, and parity. After last week’s noted bullish correction that stopped just short of parity, price has gone on further to break down below further key support levels including 0.9700 and 0.9550. Now that price has reached its 0.9400 downside target (the 161.8% Fibonacci extension of the rising wedge correction), another bullish correction may be in order, but the overall directional bias continues to be to the downside in line with the strong prevailing bearish trend. The next key support target to the downside resides around the 0.9200 price region, followed by the psychologically important 0.9000 level.

(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)

James Chen, CTA, CMT
Director of Technical Research and Education
FXDD

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