The US dollar took on a bid tone today as Greek concerns weighed on the European majors. The Aud$ also came under pressure after hints of further rate cuts from the RBA Governor, Glen Sevens. Equity markets liked the weekend announcement of the China increased stimulus programme and reversed Friday’s sharp falls. In the absence of any major data today it could be a sideways session as the market begins to focus on the Eurogroup meeting on Friday at which Greece will be the top of the agenda. The RBA Minutes will be the highlight in Australia, while Japan gets the Leading Economic and Coincident Indices. Later on it will be the ZEW Economic Sentiment Survey that will be in focus, but that’s about it, in what could be a choppy but rather directionless session.
Further gains, following the surprise China RRR stimulus package, were eradicated after the RBA Governor Glen Stevens indicated that more rate cuts are a possibility despite Sydney house prices. The Aud headed quickly lower from earlier levels near 0.7800 to a low of 0.7705, before settling at 0.7725.
Today will be the turn of the RBA Minutes to provide the interest, but it seems likely that in the absence of any other major data today that the Aud could chop around while waiting for tomorrow’s important CPI reading (exp 0.2%qq, 1.3%yy, Trimmed Mean 0.6%). Later in the week sees the NAB Business Conditions/Confidence and the HSBC Flash China Mfg PMI (prev 49.6).
The short term charts are pointing lower, so a test of 0.7700/05 could be on the cards, below which, the 200 HMA at 0.7690 will provide support. A break of this would then see us back in more familiar territory, within the consolidation area, heading towards 0.7675 and possibly to 0.7600.
Further out, the view remains unchanged, and once back below 0.7600, decent support would lie at 0.7575, 0.7550 and at the trend low of 0.7532 (2 April low). Below this, 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 this 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.
On the topside, the 100 HMA is at 0.7730, above which 0.7760 will see sellers ahead of 0.7800, which currently looks pretty safe. Above 0.7800, Friday’s high of 0.7842 will be the initial hurdle, but above which would suggest a run towards 0.7884 (26 March high), 0.7904 (25 March high) and to the trend high at 0.7937.
For the coming day, look for a choppy session with a mild downside bias, possibly on the back of some dovish RBA Minutes, looking to test 0.7700 and possibly 0.7675. Offers at 0.7760.
Economic data highlights will include:
RBA Minutes..
Jim LanglandsFX Charts www.fxchartsdaily.com
