AUD/USD: 0.7820EUR/USD: 1.1075The dollar has risen strongly against the European majors after some soft EU Services data, ahead of today’s ECB and BOE meetings. The ECB will be the main focus, where plans for the upcoming QE programme are expected to be revealed, along with the revised EU inflation and growth outlooks, and look likely to keep the Euro under pressure. Elsewhere, the Aud and Kiwi have been remarkably resilient in the face of the US$ strength and will take direction today from the Australian Retail Sales and Trade Balance. There is also some secondary data due later on; German Factory Orders, US Jobless Claims and Factory Orders, beyond which, the focus will begin to turn towards tomorrow’s US jobs/NFP data.
The Aud has remained remarkably solid following Tuesday’s RBA meeting, particularly in view of yesterday’s below-trend local GDP report and the strength of the US$ against the other majors today, even reaching 0.7860, but beyond which proved too much as sellers lined up ahead of 0.7880. The Aud has since taken a quick dip back to 0.7803 on the back of a report in the Australian newspaper that Rio may cut 1000 jobs as part of its cost cutting programme, but still holds above 0.7800 at the time of writing.
The thrills never cease in the Aud, and today is the turn of the Retail Sales and the Trade Balance to provide the entertainment. The RS are expected to show some improvement to +0.4% for January, while the Trade Deficit is expected to widen from $0.436 million in December to $0.950 million in January.
Technically there is little change and the charts are currently giving little hint in either direction.
If today’s RS data is better than expected, then 0.7850/60 may again come under pressure, although given the strength of the US$ elsewhere – with possibly more to come on the back of a lower Euro after the ECB meeting, – it is difficult to see the Aud making further upside progress with any ease. If wrong, a topside break would then head on towards 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, which comes in roughly in line with the sideways channel that appears to be forming, as per the chart. Note also that the Aud is also approaching the top of the major descending channel, at approximately the same 0.7900 level. If we do break above here, and take out the 0.7915/22 level (0.7922: 23.6% of 0.8910/0.7625) then the Aud could potentially head a fair bit higher, so will be worth keeping an eye on.
On the downside, if RS/TD readings are soft, then 0.7800 will again come under pressure, beyond which, the Aud could then head back to 0.7770 and possibly to the strong support at 0.7750/40. I would be doubtful of heading below here for a while now, but if wrong, 0.7720/25 will be the next support ahead of 0.7700. A break of this level 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.
Economic data highlights will include:
Retail Sales, Trade Balance
Jim LanglandsFX Charts www.fxchartsdaily.com
