AUD/USD: 0.7680EUR/USD: 1.0785A relatively hawkish FOMC Minutes, with the Fed Board members split as to the timing of an impending rate hike but generally pointing towards a move in H2 2015, allowed the US$ to regain some of its earlier lost ground against the majors today. The Aud$ also performed well, on the back of some carry-trade interest after the RBA left rates on hold, as did Sterling for a while, due to some M&A optimism after Shell made a bid for British Gas Group. The highlight today will be the BOE Meeting, although no policy change is expected, while we also get some secondary data from both Germany and the US. Australia gets the Construction data, but that is about it, so it may be a fairly rangebound session.
The Aud put in a reasonable performance today, reaching a high of 0.7727 in Europe, on the back of what has been put down to carry-trade buying after the RBA decided to keep rates on hold while at the same time no immediate Fed rate hike appears to be on the cards. The relatively hawkish FOMC Minutes took some of the wind out of the sails of the Aud, although it has relatively outperformed and is finishing the US session at 0.7685.
Technically, these elevated look as though they may persist for a short while and another test of 0.7700 would not surprise. Beyond there would then have the potential for a run back towards the session high (0.7727) and on to the daily Kijun/weekly Tenkan, which both sit at 0.7633 and would provide a major hurdle ahead of any chance of a move back towards 0.7800.
In the longer term though, with Iron Ore prices trading below US$50 pt and with a May RBA rate cut in the markets sights, I think that any run to the topside will prove to be temporary before the market once again tests lower levels. The initial support today will arrive at 0.7640 where the 100/200 HMA’s are crossing, below which would see a run back towards 0.7600 and eventually to 0.7575.
In the absence of any major data, aside from the Construction PMI, I doubt we are heading below 0.7600 today, but further out, the points to watch would be 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 black 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.
Use 0.7630/0.7730 as a guide. Looking to sell rallies.
Economic data highlights will include:
AIG Performance of Construction Index.
Jim LanglandsFX Charts www.fxchartsdaily.com
