Today is a day for relative quiet ahead of the storm of event risks that pick up with tomorrow’s key US data and then continues through the end of the week. Tonight sees significant input for AUD traders.
Yesterday’s slightly stronger than expected ISM manufacturing failed to do much for the greenback, as more important inputs for the market await in the form of tomorrow’s ISM non-manufacturing and the Friday employment report. EURUSD rejected an attempt at the 200-day moving average close to 1.3075 this morning (thus far at least – ranges are tight) and USDJPY had a sniff near the 100.00 level after a relatively upbeat Asian session despite Wall Street limping into the close yesterday. The Nikkei has managed an impressive 1000+ points over the last four trading days.
The RBA meeting overnight was rather dovish, but failed to surprise significantly as there was no actual rate cut, which a small minority of observers were expecting. The statement complained that the Australian dollar remains too strong – and that the inflation outlook provides scope for further easing, should that be necessary. The reaction was fairly immediate as the Aussie sold off, but the currency has come back a bit in Europe and is finding some support in term. There was no real reaction in rate markets or the STIRs, so the market will be looking for further developments and I wonder if the potential for a near-term Aussie squeeze is building. Tonight’s data will likely provide a clue, and there’s no evidence just yet in the likes of AUDNZD, which plunged back close to the lows for the cycle near 1.1750 overnight.
Chart: USDJPY
The 100.00 area is double significant because of the psychology of that level (remember the extensive tease near there just after the watershed April 3-4 BoJ meeting) and because it is the 61.8% Fibo retracement of the move from the 103.75 top to the 93.80 low.
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Looking ahead
Tonight’s data out of Australia might be more important for the direction of Aussie than last night’s RBA decision, as we have both key Chinese services industry survey data and Australia Trade, Retail Sales and New Home Sales data as well as a survey of its services industry. That latter survey in May saw its weakest level since April of last year and was the second-lowest reading since early 2009.
Elsewhere, it’s all about those significant levels for EURUSD (1.3075/80) and USDJPY (100.00), which are important pivot areas for the action for the balance of the week. And in EURGBP, it’s about 0.8600 and whether that level holds on the other side of the ECB/BoE meetings on Thursday.
If you missed it late yesterday, please see my brief post highlighting all of the 2013 ECB meetings on a EURUSD chart - and showing how often these meetings prove critical for the subsequent action in the currency pair.
Economic Data Highlights
- Australia RBA left Cash Target unchanged at 2.75% as strong majority expected
- Spain Jun. Unemployment Change out at -127.2k vs. -100k expected and -98.3k in May
- UK Jun. Construction PMI (0830)
- Euro Zone May PPI (0900)
- UK BoE’s Tucker, Bailey speaking (0900)
- US Jun. ISM New York (1345)
- US May Factory Orders (1400)
- US Fed’s Dudley to Speak (1630)
- US Weekly API Crude Oil and Product Inventories (2030)
- US Jun. Vehicle Sales (2100)
- Australia Jun. AiG Performance of Service Index (2330)
- China Jun. Non-manufacturing PMI (0100)
- Australia May HIA New Home Sales (0100)
- Australia May Trade Balance (0130)
- Australia May Retail Sales (0130)
- China Jun. HSBC Services PMI (0145)