AUD/USD: 0.9295EUR/USD: 1.3225The Aud is going to be the centre of interest today with the CPI and the China HSBC China Flash Mfg PMI coming up, and it is warming up for it by breaking the minor descending trend resistance, and heading towards 0.9300, as the US$ remains under pressure on all fronts.
The earlier news coming from Chinese Premier Li Keqiang did no harm to the Aud, when he suggested that 7% annual growth is the bottom line as far as what is acceptable to the authorities. The suggestion is that any approach towards that level would most likely result in some economic stimulus to ensure that growth remains on track, at or above 7% p.a.
There is unlikely to be any real action ahead of today's data but the charts do look positive on most fronts and if/when 0.9300 can be taken out, the next targets will be the July 11 high of 0.9306, the 26 June high at 0.9344 and then 0.9368 (23.6% of 1.0582/0.8998). Above that, descending trend resistance is at 0.9470.
The downside looks a bit limited right now and unless the CPI/China data is very soft, then bids are likely to arrive at around 0.9240 minor rising trend support. It does not look as though we are heading below here today, but if wrong further support should be seen at 0.9200.
Given that the market still seems to think we are in for an August rate cut, and that a CPI reading of 2.5%yy (0.5%mm) would allow for a cut, I would not be getting overly bullish up here, but it does look, for the time being, as though the upside is the path of least resistance. Wait for the data and go with the flow, but if the reading does come out at 2.5%, it would seem pretty much written into the price and we could see a bit more of a short squeeze. Given that food and vegetables are expected to have risen, and the price of petrol is close to all time highs, I am not sure how the economists expect a soft reading - which is why I am not an economist, I guess!
Economic data highlights will include:
CPI, China HSBC China Flash Mfg PMI
