AUD/USD: 0.7710EUR/USD: 1.0735It was a choppy session again today in the the absence of any major data, and with the dollar ending mixed against the other majors, with much of the focus being on the situation in Greece. It could be much the same again today; with little due from either the EU or the US (Existing Home Sales), as the market begins to turn its focus towards Friday's Eurogroup meeting. Australia will get the CPI data, which will push the Aud around, and with a weak number likely to push AudNzd below parity for the first time. Later in the session, the BOE Minutes will be the main attraction.
The comments from Glenn Stevens appeared to lose their effect, as the Aud rallied from the Asian low of 0.7682 to reach a high of 0.7753, where the 100 HMA provided a cap, before easing back late in the day to sit near 0.7705.
Today will be a big one for the Aud, with the CPI due (exp 0.2%qq, 1.3%yy; trimmed mean 0.6%qq, 2.2%yy) , the outcome of which will play a leading part in expectations as to whether the RBA are likely (or not) to cut rates in May. Economists generally expect a fairly benign CPI result on the back of weak fuel prices in Q1, which would allow the RBA to proceed with a cut and would keep the lid on the Aud. A headline figure of above 0.2%qq/1.3%yy would delay any thoughts of such a move and could see a squeeze higher, possibly back towards/above 0.7800.
Technically, the charts are mixed and offer little clue. To the downside, below 0.7700, the low of 0.7682 will provide the initial support, below which, minor Fibo supports will arrive at 0.7665 and 0.7620 ahead of 0.7600. If/when we ever head 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.
A surprise to the upside in the CPI would see the Aud squeeze back to 0.7755 (100 HMA) above which would visit 0.7780 and possibly 0.7800, but 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.
A weak CPI would likely see a test of AudNzd 1.0000 (currently 1.0055), below which would likely trigger stops in the Aud and underpin the Kiwi.
Economic data highlights will include:
Australian CPI, WBC Leading index, China Leading Index.
Jim LanglandsFX Charts www.fxchartsdaily.com
