With all the attention on the Euro, thanks to the Greek saga, and increasingly the Dollar, complements of the fiscal cliff scare, other currencies are receiving limited coverage. One could even say they fly under the radar. Among them is the Australian Dollar, which had very little new developments, at least from the fundamental perspective. However, a quick glance at most of Aussie's pairs reveals a weakness. Now we have to wait and see whether it is a normal consolidation, or perhaps a start of a larger selloff.
The RBA has its monthly policy meeting next week and this could prove to be a catalyst for a more inspired behavior. Recently more and more analysts predict another rate cut, which should be AUD negative. While there is no consensus, the more voices calling for lower rates, the higher the chances for a decline. In days leading to the RBA meeting, that could become "priced in" if market participants at large position themselves accordingly. The interest rate decision will settle the dispute, but the AUD will probably drift lower in the meantime.
One of the crosses where this softness is not well pronounced is the AUD-JPY. Of course, this mostly due to falling fortunes of the Yen. That said, this pair could be a good proxy for the broader fate of the Aussie – if it moves lower that would confirm the strain on the AUD in a broader sense. The hourly chart has already formed a potential topping pattern with a support at 85.20. Should this level be breached, the price will likely keep falling, maybe enough to capture 50-60 quick pips.
Outside of this, I will focus on short-term trading on Friday. Like every week, London opening could present breakout opportunities, depending on price ranges in preceding hours. I find the USD pairs most suitable for this approach. In addition, GDP figures from Canada often create increased volatility in the Loonie, making it a key event to watch on Friday.
Mike K.