AUD/USD: 0.7600EUR/USD: 1.0930The general gloom, seen after the awful NFP on Friday, appears to be reversing with a strong showing today in the equities markets that eventually flowed into the dollar which saw a late rally in NY, albeit in thin holiday conditions. The main focus for Asia will be on the outcome of the RBA meeting, which is finely balanced as to whether we will or will not see a rate cut. The general consensus appears to be on the RBA sitting on their hands today, and waiting until May until they make their move. Later in the day, the focus will be on Europe where the Services/Composite PMI’s and the EU Sentix Investor Confidence survey are due.
After reaching a post-NFP high of 0.7694, the Aud has chopped around mostly above 0.7600 before falling heavily in late NY trade today, to a low of 0.7578 as the market gears up for the chance of an RBA rate cut later in the coming session. The market seems fairly evenly balanced as to whether there will or won’t be a cut, although the consensus seems to be that the RBA will stay on hold today and then cut in May. Given the economic outlook, the rising unemployment level and the lower iron ore price a rate cut would seem to be favoured, as is being priced into the market, with only the rampant Sydney real estate sector appearing to stand in the way.
A cut is coming anyway at some stage, so the downside for the Aud seems to be the path of least resistance, with the initial support levels to watch being at 0.7559 (11 Mar low) and at 0.7532 (2 April low). Below here the RBA’s line in the sand at 0.7500 will provide stronger support, but a break of which would open up the way to 0.7414 (Oct 2010 low), beneath which there is a bit of a hole until the very strong support at around 0.7200, where two important Fibo levels are lining up (0.7210: 61.8% of 0.4773//1.1082 and 0.7180: 76.4% of 0.6006/1.1082). I suspect that eventually 0.7000 will appear on the horizon (and even 0.6000!), but this is going to be some way off yet.
If the RBA do stay on hold today, we are going to get another spike back towards 0.7650/60 and possibly on towards 0.7700, although if seen it would most likely be temporary and would offer a reasonable sell opportunity as the market turns its thoughts immediately towards next month’s meeting.
Before the RBA, the ANZ Job Ads and the Retail Sales are due and may cause some minor waves.
Economic data highlights will include:
ANZ Job Ads, Retail Sales, RBA Interest Rate Decision /Statement
Jim LanglandsFX Charts www.fxchartsdaily.com
