AUD/USD: 0.9200EUR/USD: 1.3260It appears that the bulls got a little over excited about the possibility of a run up to 0.9300 and hopefully beyond, yesterday, and having looked bid early on in the session, reaching a top of 0.9287, it has been a steady decline ever since.
The market appears to think that an RBA rate cut is increasingly likely and has kept the pressure on the downside in the latter half of the session, reaching a low of 0.9187. RBA Governor Glen Johnson will be speaking today, so the market will be hanging on his every word, hoping for a hint of what to expect next week. On top of the RBA, the market also has an eye on the chances that the Government could raise taxes and cut spending to meet revenue shortfalls in order to reign in the budget deficit.
The session has therefore turned out much as we expected, having been well contained within the 0.9155/0.9300 range, and for the time being I suspect we can continue to use this as a guide, with tight stops placed either side. Today it is the downside that looks under the more immediate pressure and below 0.9155 would see an acceleration towards 0.9128 (25 July low) and then to 0.9120 (61.8% of 0.8998/0.9298). So 0.9120/30 should see reasonable bids, but below here, the way would open up for a decline to 0.9075 (76.4%), and although this may be a stretch too far today, the short term indicators are suggesting that it is currently the path of least resistance.
A turn higher needs to recover 0.9220/30, above which, there will be sellers at 0.9250 and 0.9290 ahead of 0.9300.
Look for a day of 0.9230/0.9160 with a chance of heading a bit lower. Today's Building Permits will be closely watched after yesterday's reports that the construction industry is failing to make up for the downturn in the mining sector and if they come in below expectations of 2.3% we may head a bit lower.
Ultimately though, the movement in the Aud will be dictated by the direction of the US$ and also by data from China, where Thursday sees the Official and the HSBC Manufacturing PMI’s. Any further signs of weakness in China would put a further dent in the Aud, and given last week’s weaker flash reading, that is quite a possibility.
Economic data highlights will include:
Building Permits
