AUD poised for volatility

June 14, 2016

The Australian dollar continues to be a mixed bag for traders, and after today's Chinese data many will be starting to worry about the prospects of any further gains as retail sales slipped slightly to 10.0% (10.1% exp) and as industrial production came in flat at 6.0%. For many these are typical of the recent trend for China, which has continued to show a slow down for the last few years. For many though this will weigh heavily on the Reserve Bank of Australia and despite the recent positive data some in the market will still be looking for a rate cut in the near future. However, today's business confidence will be an important metric for the economy, as the market continues to feel the pressure from China and internally with many expecting a fall in the AUD in the long run when it comes to forecasts.

After last Friday's solid touch of resistance at 0.7481 the market has looked somewhat bearish and has rushed down to find support - given the market's bearish though process as of late. The touch on support has so far lead in part to some buying at 0.7360, but at this stage it seems more than likely we could see further pressure on these levels and a further push down to 0.7226 is likely on the cards given what we have previously seen when it comes to trend movements for the AUUDSD.  The 50 day moving average is also acting as dynamic resistance in the market and it's expected to remain that way for some time to come as the AUDUSD continues to treat the 50 day with respect.

Yen traders are looking all the more bullish as of late as global uncertainty continues to weigh heavily on the Yen and cause traders to move out of USD positions and into the Yen as a hedge given the recent economic data we have seen. For many the real bogie man is the upcoming retail sales which are expected to be much worse than the previous month's figures, with many expecting at least a 50% drop in the figures.  On top of all this we have Final Industrial Production figures which are expected to show a slight rise, all of which will further cement the Yen against the USD in the current market climate.

The recent drop on the charts has shown fierce support at 105.534 and I would expect this level to continue to hold up in the short term on a purely technical basis. If we see weak US data then expect a sudden drop on the charts and this level to most likely break. However, a swing upwards is likely to find strong resistance at 107.933, and for the most part the BoJ will likely talk down further drops and try and keep the USDJPY ranging in the short term. 

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