AUD/USD: 0.7850EUR/USD: 1.0880The Euro is firm and the US$ again under pressure, after some signs that Greece wants to be more accommodative in their negotiating stance in order to avoid the chance of a default/EU exit. Cable and the Aud were particularly strong performers but most currencies finished near their session highs against the dollar. Metals also had a strong day, assisted by the solid bounce in the Iron Ore price over the last few sessions, doing the Aud no harm at all. The market may now settle down ahead of Wednesday's FOMC Meeting, but the recent soft data does not indicate any need for the Fed to hurry to act on rates, and a dovish outcome would well see the US$ under further pressure. The RBA Governor Glen Stevens is about to speak at the AFR Banking & Wealth Summit, and the Aud will take its direction from what he has to say. Later on the focus will be on the UK Provisional Q1 GDP, and then from the US, the Case Schiller House Price Index, Consumer Confidence and the Richmond Fed Mfg Index.
The Aud has taken advantage of the weaker US$ (and the stronger Iron Ore price) and has broken above the 0.7840 resistance in reaching a high, so far, of 0.7871, before settling the US session back at 0.7850.
The charts suggest that we could yet see higher levels in the Aud, and the bounce in the Iron Ore price, now back close to $58.70 p.t. would seem to underpin that view. The RBA Governor Glen Stevens won’t be happy with the state of affairs and will be talking at the AFR Banking & Wealth Summit at 8.30 AET. He may well follow up his comments of last week and talk the Aud lower. If he says nothing about the currency, the market could well do the reverse and may produce a quick spike higher to take out 0.7870, above which would head to descending trend resistance at 0.7880 and then on to 0.7900 and to the previous trend high at 0.7937. Above there would suggest a sustained run at 0.8000, and to avoid this, it appears that the market is going to need to believe that the RBA will cut on 6 May. Alternatively, the US$ correction, combined with a dovish FOMC outlook on Wednesday, could make the AudUsd carry trade an attractive proposition as we approach the Northern hemisphere summer months making 0.8000+ a reality.
The downside will find support today at 0.7840, and then below 0.7800, at the session low at 0.7790. Unless Glen Johnson is very assertive on the currency outlook, in another attempt to push the Aud lower, then below here seems unlikely today. If wrong, look for a return to the 100/200 HMAs at 0.7770/80 below which further support would then arrive at 0.7750 (38.2% of 0.7552/0.7871) and 0.7710.
Wait for GS, but unless there are any surprises from him, buying dips appears to be the short term plan.
Economic data highlights will include:
RBA Glen Stevens Speech
Jim LanglandsFX Charts www.fxchartsdaily.com
