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Australian Dollar Continues To Outperform, Euro Correction Underway

Australian Dollar Continues To Outperform, Euro Correction Underway

2011-02-07 16:16:00
David Song, Currency Strategist
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Australian_Dollar_Continues_To_Outperform_Euro_Correction_Underway_body_ScreenShot028.png, Australian Dollar Continues To Outperform, Euro Correction Underway

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

AUDUSD

1.0150

1.0158

1.0106

34

52

Australian_Dollar_Continues_To_Outperform_Euro_Correction_Underway_body_ScreenShot029.gif, Australian Dollar Continues To Outperform, Euro Correction Underway

The Australian dollar pared the overnight decline against the greenback to maintain the range carried over from the previous week, and the exchange rate may push higher going into the Asian trade as investors raise their appetite for risk. The AUD/USD is 30+ points higher on the day after moving only 47% of its average true range, and the pair may make another run at 1.0200 as risk sentiment continues to dictate price action in the currency market. As the aussie outperforms against its major counterparts, the nearly term rally in the exchange rate may gather pace going forward, and market participants may show a bullish reaction to the economic event risks scheduled for later this week as the data reinforces an improved outlook for future growth. However, the near-term rally in the aussie-dollar may taper off in the days ahead as it appears to be carving a top just below 1.0200, and retail traders may be able to take advantage of a short-term reversal in the exchange rate as support lies around 0.9800.

Key Levels/Indicators

Level/Indicator

Level

10-Day SMA

1.0042

20-Day SMA

0.9990

50-Day SMA

0.9966

Daily RSI

61

Upcoming Events

GMT

Importance

Release

Expected

Prior

5:30

LOW

Foreign Reserves (JAN)

--

-0.2%

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

EURUSD

1.3532

1.3627

1.3509

37

118

Australian_Dollar_Continues_To_Outperform_Euro_Correction_Underway_body_ScreenShot0300.gif, Australian Dollar Continues To Outperform, Euro Correction Underway

The Euro extended the decline from the previous week to reach a low of 1.3509 on Monday, and the single-currency may continue to retrace the advance from earlier this week as fears surrounding the sovereign debt crisis bears down on market sentiment. The EUR/USD remains nearly 40 pips lower on the day after moving 75% of its ATR, but we may see a short-term reversal unfold over the next few hours of trading as the relative strength bounces back from oversold territory. As price action continues to hold above the 50.0% Fibonacci retracement from the 2009 high to the 2010 low around 1.3500, a correction in the exchange rate could lead the euro-dollar to pare the decline from the previous week, and we may see the pair trend sideways ahead of the EU Summit in March as investors weigh the prospects for future policy. However, as European policy makers maintain a lackadaisical approach in addressing the debt crisis, the single-currency remains at risk of facing additional headwinds over the near-term, and a break below 1.3500 should expose the 50-Day SMA at 1.3327. The next 24 hours of trading will certainly be interesting to see if the EUR/USD will continue to hold above the 50.0% Fibonacci, and a close above 1.3500 could set the stage for a small rebound in the exchange rate as the near-term decline remains oversold.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

1.3531

20-Day SMA

1.3527

50.0% Fib

1.3500

50-Day SMA

1.3327

Upcoming Events

GMT

Importance

Release

Expected

Prior

11:00

MED

German Industrial Production s.a. (MoM) (DEC)

0.2%

-0.7%

11:00

MED

German Industrial Production n.s.a. and w.d.a. (YoY) (DEC)

11.8%

11.1%

Join us to discuss the outlook for the major currencies on the DailyFXForums

To discuss this report contact David Song, Currency Analyst: instructor@dailyfx.com

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