Aussie Unglued As EUR/USD Tests The 1.30 Magnet

 | Sep 10, 2014 04:28AM ET

The AUDUSD chart has suddenly transitioned from boring, rangebound behaviour to a sudden avalanche to the downside on the break of the key range and semi-head and shoulders formation. AUD testing below 0.9000 The next major targets are shaping up not far below 0.9000 now that the 200-day moving average has been punctured. Interesting to note that the AUD downside is vastly outpacing the latest action in EURUSD, where the action may be congealing a bit and where it is quite possible in a risk-averse environment that we see EURUSD relatively stable while the euro tracks the USD as it storms higher against the smaller currencies. Let’s have a look at the EURAUD chart and consider what this means. Chart: EURAUD A strong snapback from the post-European Central Bank meeting lows suggests that the downside action in EURAUD may be overdone in the near term. I suspect that we are seeing a bit of the euro’s negative correlation with risk appetite showing here as yesterday saw a rather weak session on Wall Street, though much of the action is due to AUD weakness. I am biased for upside if risk appetite weakens further in the near term. 1.4000 could shape up as a major support if the action pauses, or the squeeze could continue unabated if we see a weak employment report out of Australia tonight.