USD: Turning point or window dressing?
• EURUSD and Cable march higher
• USD Index on the move
The Reserve Bank of Australia left rates unchanged overnight and the moderately anticipated doveish tone in the accompanying statement seemed to be lacking, for the most part. No real material change to the rhetoric was noted and thus those sitting waiting for just that moment were caught off guard. The Aussie took a pop to the upside trading into highs for the year, just surpassing the previous, at 0.9461, and printing 0.9463. We are sitting today just off those levels, and capitulation seems almost imminent but how far this extends is, of course, key. I would wager that those currently short will be happy to see their bids filled under the 0.9430 area and probably won’t be chancing their arm too much more. No real notable sellers are being seen for the time-being.
Yesterday's month/quarter/half year-end shenanigans saw one-way traffic and that was all against the USD. Sellers of the Greenback were all over the street and thus caused the likes of the EURUSD and the Cable to march ever higher. The EURUSD surpassed seemingly rock hard resistance at 1.3680 but failed to climb too much higher as talk of a Double No Touch option barrier at 1.3700 kept the pair contained. We are walking in to similar levels today and even the mixed (mostly slightly better) bag of PMI prints has done little to really move the cross. Below 1.3670, I would expect some capitulation of yesterday's exuberance, however, with a return to the 1.3650 area possible.
On the Cable, well it’s an entirely different matter as the PMI print here was nothing short of stellar and once again gave cause for punters to buy the Sterling. Hitting highs in the Cable unseen since 2008, the proud pound took off and still retains its bid tone, at the time of writing. Those that got on the GBPCAD I mentioned last week should be somewhat more cheerful now as the pair has had quite the move.
Later this afternoon we’ve got US PMI and construction prints to look forward to and the fear here is that they will simply confirm the poor state of play the US economy continues to languish in. The USD index has had quite the move in the past 18 hours and while, yes I’m a USD bear and have been for quite some time, even I would expect some sort of consolidation in the near term ahead of Thursday's key risk events.
All in all though, it should remain a relatively quiet day today as markets get ready for the tail end of this week and thus will be likely to try to keep what little powder they have left dry.
As always folks, helmets on and good luck out there today.
Ken Veksler is director of Accumen Management. Read more of his articles here.