USD Trading Outlook
The important levels in the AUD/USD which we mentioned yesterday, 1.0220 on the downside and 1.0360 on the top, are both still relevant with the market failing to get within 20 pips of either. The main mover overnight was the GBP and the much better than expected GDP data might go some ways to shifting the bearish sentiment towards sterling. Nothing much is expected of this afternoon’s BOJ statement but there is always a risk of course.
It looks like it might soon be time to start easing back on AUD shorts with solid buying interest and some technical factors indicating that further losses in the very short-term might be very hard fought. Yesterday’s Chinese data sent the Aussie lower but that is very quickly forgotten in the FX market and all eyes now turn to the CPI data today. Overnight manufacturing data from the EZ was below expectations whilst this morning the RBNZ left rates unchanged as expected.
Falling metal prices ensured that the AUD gave back all of its intraday gains on Friday and finished the week on a bearish note. The fact that a recovery in precious metal and equity markets could not help the AUD to sustain any gains shows just how much market sentiment towards the Aussie is shifting.
The G20 avoided any overt criticism of Japanese policy toward the Yen and these comments maintained the bearish tone in the JPY, although market positioning remains very short so I do not expect any more sharp falls in its value in the short-term. ECB comments regarding the effectiveness of any further interest rate cuts helped the EUR to rally on the crosses, especially against the JPY, GBP and AUD.
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