AUD/USD: 0.7770EUR/USD: 1.1180The dollar remains firm today despite underwhelming US data, as the bond market continues to push yields higher in anticipation of a rate hike coming from the Fed, most likely in September, unless that theory is unwound by a soft US jobs report on Friday. Ahead of that and the other key focus, Thursday’s ECB meeting, today’s main action will be in the Aud$, after the RBA meeting, due in today’s Asian session. The market is leaning on a 25bp cut, but could be disappointed if the RBA are concerned about the real estate sector. Elsewhere, the main events today will be UK Construction PMI, German Retail Sales, EU PPI and the US ISM NY Index.
The Aud largely ignored the better than expected Chinese data yesterday and remains heavy ahead of today’s RBA Meeting/Statement and is currently sticking pretty much to the 200 Month MA at 0.7780.
The market seems to have convinced itself that the RBA will cut today, with the only argument against doing so being the probable effect on the already inflated housing sector.
If we do see a cut, then the Aud is likely to head swiftly below the session low of 0.7755 and the support 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 towards the channel support at 0.7680 and on to the 12 Feb low of 0.7643 and the trend low at 0.7625. Eventually I suspect we will reach the RBA’s stated target of 0.7500, and from a technical point of view we could head a lot lower, although that would be a long term move.
On the topside, if there is no cut, then we will see a spike to back above 0.7800 and on towards minor resistance at 0.7830 and possibly to 0.7850. Above this could take the Aud up to 0.7880 and possibly even towards 0.7900 but if seen I would be a seller, with a SL placed above last week’s 0.7912 high.
As we said yesterday, in the absence of any rate cut this month, I think any strength would prove temporary as it would merely delay the likelihood of the next cut, which could then come in April or May.
Economic data highlights will include:
Building Permits, Current Account, RBA IR Decision/Statement
Jim LanglandsFX Charts www.fxchartsdaily.com
