AUD/USD: 0.7815EUR/USD: 1.1190February finished with the dollar largely consolidating last Thursday's gains but with little directional price action on Friday, although the Euro and the Yen were both relatively weak on the day. The coming week will be busy, and the initial interest will be on the surprise weekend China 0.25% cut in the RRR and the official manufacturing PMI which came in just above expectations at 49.9. Beyond that, the main focus is going to be on the interest rate decisions from the ECB, BOE, RBA and the BOC which all come ahead of Friday's US Jobs data and NFP data. Today kicks things off a busy session, with the the global PMI's, the EU CPI and Unemployment, US Consumption/Expenditure and Construction Spending all due. Australia will also be busy, as aside from working out the Chinese data we get the local AIG manufacturing PMI, the TD Inflation data, HIA New Home Sales and the China HSBC manufacturing PMI. Later in the week, other highlights will be GDP and Retail Sales data from the EU/Germany and Australia and the US ADP Jobs data. Enough to keep us on our toes, and not forgetting Greece!
The Aud chopped around rather aimlessly on Friday but finished on a relatively positive note, above 0.7800 after having recovered from the 0.7777 session low to reach a high of 0.7833. The surprise weekend Chinese rate cut, which combined with yesterday's slightly stronger than expected manufacturing PMI (49.9 vs expected 49.7) saw the Aud make an early blip up to 0.7850 this morning, although it is now back at 0.7815 as future Chinese growth prospects and the possibility of an RBA rate cut weigh on the downside.
This week is going to be busy, starting with plenty of data today but with the real focus on tomorrow's RBA meeting and then on the GDP figure, due Thursday.
The market seems to be coming increasingly of the view that the RBA will cut rates and could also lean towards an easing bias, in which case the Aud is holding up remarkably well, although this is probably due, in part, to the latest CFTC figures which show Aud shorts to be at the greatest level since January 2014.
Technically, the short term indicators are mixed and give little hint either way although the dailies still actually have a positive bias as they unwind their oversold condition.
Today sees the AIG Performance of Mfg index, TD Inflation and HIA New Home Sales, and while the Aud will take some direction from these, the HSBC China Mfg data will most likely be the main driver. Back below 0.7800 would suggest that it could be headed to the base of the short term channel now at Friday’s low at 0.7777 a break of which would see further bids at last Thursday’s low at 0.7756 below which could head back to Tuesday’s brief low, at 0.7740, seen immediately after the release of the previous RBA Minutes. Below there, 0.7720/25 will be the next support ahead of 0.7700, a break of which would then head to minor support at 0.7665/70 and possibly on to last Thursday’s session low of 0.7643 and the trend low at 0.7625.
The topside is going to find sellers at 0.7830/35 and then at this morning’s brief, early interbank high at around 0.7850. I don’t really see the Aud much above here today unless the upcoming data is surprisingly strong, which being the case, could take the Aud up to 0.7880 and possibly even towards 0.7900. If seen I would be a seller, with a SL placed above last week’s 0.7912 high.
If the RBA do not cut tomorrow, then given the short positioning of the market, we could get a nasty short squeeze after the announcement. I think any strength would prove temporary as it would merely delay the likelihood of the next cut, which could then come in April.
Economic data highlights will include:
M: AIG Performance of Mfg index, TD Inflation, HIA New Home Sales, China HSBC Mfg PMI, RBA Commodity Index
T: Building Permits, Current Account, RBA IR Decision,
W: AIG Performance of Services index, GDP, HSBC Services PMI
T: Retail Sales, Trade Balance
F: AIG Performance of Construction Index.
Jim LanglandsFX Charts www.fxchartsdaily.com
