The biggest mover and news overnight was the much better than
expected Australian CPI data and thus in tandem the AUDUSD has hit
record highs, roughly where it trades at the time of writing 1.1070 or
thereabouts. The data came in much higher than expected not only on the
q/q side but more importantly now on a y/r basis pushes the rate of
inflation to the upper bounds of the Reserve Bank of Australia comfort
zone. This clearly puts pay to any thoughts of rate cuts and for the
time being leaves the potential for another hike on the table. If you
cast your minds back there have been several instances whereby RBA
speakers have intimated that before any move is made they will wait to
see this data printed last night and thus react accordingly. While a
stronger AUD is in some contributing to the overall inflationary
picture, chatter on the news wires this morning has indicated that there
will not be any intervention in the market, and quite frankly nor
should there be. Fair to say then that a rate cut is off the table and
now all eyes will be on the November RBA meeting, where if a move
happens, it will likely be at that meeting.
Elsewhere, the AUD was not the only beneficiary of the continued USD
weakness, the other cross painting most movement is the USDJPY which is
now not far from the extreme reactionary low of 76.25 (March earthquake
print).
We’re set to continue to see more of the same as the suggested vote
due to take place today has now been postponed till tomorrow, really
cutting a fine line into the deadline set at August 2nd. With such
uncertainty come new highs in Gold understandably and even more calls
from various quarters for a return to the gold standard, and you know
for the first time, I’m loathed to disagree… Bottom line: where is
everyone keeping their money right now? Simple really, Gold, CHF and
JPY… the other hidden safe haven is the CNY although you won’t hear too
many shouting about it…
Other news overnight centered predominantly on political issues and
while the U.S. debt ceiling debate remains at the forefront of
headlines, people should still focus on the Eurozone, as the proposed
package put forward last week, still needs to be ratifies by individual
governments etc etc…
With regard to data on the day we have CHF KOF index, U.S. durable
goods and later tonight the Reserve Bank of new Zealand rate decision.
The last point will be of interest as given the lofty heights to which
the NZD has climbed we had an almost incredulous headline last night
stating that the NZD is now becoming a safe haven destination… Without
resorting to blasphemy , I’m not entirely sure how to express my
amazement at the stupidity of this statement and scenario…
On the majors, directionally difficult to play in thin markets, but nonetheless here’s what I’m seeing;
EURUSD: Still looks bid on the back of USD weakness, but will likely
struggle above the 1.4550 level (good sized stops above), having said
that though a dodgy false break will see us print 1.4570 before we
retreat lower again. The downside should be supported with bids at
1.4430, small stops below and more bids into 1.4360/80.
GBPUSD: Still looks bright (again more of a USD play) and 1.6470
should keep us contained for the time being. The downside however begins
to look interesting below 1.6330 (stops) and then legitimate support
lies in the 1.6270/80 area.
USDJPY: Well you all know how I feel about the JPY, so for now 78.30/80 keeps the topside well capped.
AUDUSD: An initial consolidation should see us test 1.0980, but for
now it’s no retreat, no surrender… Other downside levels to watch
(although not today) are 1.0830/1.0780.
USDCAD: Looks like a slightly healthier buy into 0.9390/80, but the topside will be seriously limited into 0.9470.
EURGBP: Trapped! That is all… Levels to keep an eye on are 0.8775 and 0.8850, although the latter is unlikely on the day…
EURJPY: As mentioned all along, the failure to close last week above
the 114 level, paints the picture for more downside and rallies into
113.30/50 can be faded looking for a return into 111.60 and lower over
the coming days.
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