Relief Rally has Commodity Currencies in Focus

U.S. Dollar Trading (USD) Some consolidation in the big pairs saw most of the movement confined to AUD NZD and CAD yesterday. All 3 took another leg lower but today as we enter the European trading session a relief rally in stocks and little bounce in Oil has these pairs are rather attractive levels to tempt the the longer term trend followers. USD/CAD has bounced from 1.25 to 1.2850 and AUD/USD has hit its short term targets at 0.7500. US ADP data overnight was very weak and the potential for weak USD and risk on from FED staying on sidelines longer from a poor NFP tomorrow has my attention this morning.

The Euro (EUR) Weak US Jobs was countered by decent Services PMI but the price action at 1.15 saw some very skittish traders with little interest to be buying above the figure. We open at 1.1490 and have multiple bank holidays in Europe today so i feel more range trading is likely. Tomorrow's NFP is the key and is looking to be weaker than forecast which may tempt another assault higher. Tomorrow we go over more in depth reactions pre NFP. The Sterling (GBP) Took another leg lower but was more muted than Tuesday and we bounced off 1.4470 and ended back at opening levels near 1.4520. The Pound is more risk sensitive than Euro since GBP/JPY flows can hijack its direction along with stock markets. I do feel that its fate is largely tied to that of the EUR/USD and we still might have placed a longer term top in on Tuesday. GBP/AUD and GBP/CAD are in play to the downside today.

The Japanese Yen (JPY) With Japanese trader back for the first time this week in the Asian session today we saw good support for the USD/JPY and we are above Y107 as i write and likely to test the sellers interest higher if stocks rebound today. The Australian Dollar (AUD) showing some signs of support under 0.7500 and a topide test is likely as the battle between the short term sellers and longer term buyers meets at the key level. USD/CAD fate is more directly linked to Oil movements and is also entering a key day of return to downtrend or back to 1.3000 test which opens up higher levels on a break.

Stocks Indices(DAX) Another day of selling has put the DAX on a skittish footing down at 9850 and so far the rallies have been weak. Today we have positive sentiment from the Asian session and decent US session close. Another leg lower would really damage the technicals here on the DAX but i suspect today we hold the downside and end higher. US Stocks (DOW) finding much more support on dips than than the DAX the outperformance of US stocks is clear in recent months. Recent sour sentiment from Apple and Nikkei/DAX will finally take its toll though so NFP reaction tomorrow will be critical. There is a strong possibility that Weak data is Good for stocks as this means the FED will be keeping rates lower longer.

Pairs to watch

EUR/AUD rolling over with potential for move back to 1.5000

German DAX30 Hold 9800 today opens up rebound to 10000

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Economic Data Ahead

UK April Services PMI forecast at 53.6 vs. 53.7 previously.

US Wekkly Jobless Claims forecast at 261K vs. 257K previously.

AUD RBA Monetary Policy Statement (important because RBA just cut rates)
By Anthony Darvall (TonyD)