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RBA takes the plunge

The RBA cut rates overnight, a move that was no wholly a surprise given the much weaker than expected inflation data seen last week. That said, when combined with the tone from the accompanying statement, the Aussie plunged more than 1 big figure to the 0.7560 area, before staging a modest recovery into the European close. One of the factors holding back the RBA in recent months has been the housing market, but here the RBA noted the strengthening lending standards and easing price pressures, which effectively removed the last barrier to easier policy. The move is the latest in an easing cycle that started with rates at 4.75% back in mid-2011, the longest pause being see mid-2013 to late 2014, where rates sat at 2.50%. The effect has been to move the Aussie from over-valued carry trade favourite to a more ‘rank and file’ commodity currency. The move will focus attention on both the RBNZ and BoC, both of whom are now stronger candidates for lower rates.

The other stand-out in overnight price action has been the yen, where we’ve seen a push below the 106.00 level on USDJPY. BoJ Governor Kuroda yesterday warned of the consequences of yen strength on the economy and once again re-iterated the BoJ’s willingness to take further policy measures to hit the 2% inflation target. But markets have become pretty immune to such talk. The yen remains under-valued on many longer-term measures, so for now markets are betting that this will dominate anything that the authorities can do to weaken the currency. The generally weaker tone to the US dollar has also seen the euro and sterling push through key levels, with EURUSD through the 1.1495 mid-October high and cable now at levels seen early Jan. The data calendar is on the light side today for FX markets, with just manufacturing PMI data for the UK at 08:30 GMT and jobs data in New Zealand the next key focus overnight.

USD/CAD

USD/CAD remain under pressure as far as 1.2995 peak is in place, and only a break above this level will call for a larger correction.

In the near-term, 1.2585 peak represents the bearish pivot in the near-term and should continue to cap any recovery attempt in the coming hours. In addition, we saw a break below 1.2500 psychological support, which can be an additional negative signal in this pair.

Finally, our outlook remains strongly negative as bears continue to dominate this pair.

Support 1.2500-1.2330-1.2175

Resistance: 1.2585-1.2610-1.2695

Published post Pivot Points Hourly

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US Dollar Forecast – Dollar Struggles as Rate Disbelief Lingers, Euro and Yen Gain Ground

The Dollar dove to end this past week at its lowest level in 11 months. The extension of the currency’s slide from its 13-year high set back in late January (now down over 4.5 percent) was fueled by a distinct loss of traction in rate forecasts.

Euro Forecast - EUR/USD Showing Strength, But Data Still a Mixed Bag

The Euro just capped off a fairly strong week, rising against every major currency not named the Yen; but that had its own story behind it.

British Pound Forecast - GBP/USD to Face Larger Advance on Lackluster Fed Rhetoric

The slew of fundamental developments coming out of the U.S. economy may play a larger role in driving GBP/USD volatility especially as the U.K. docket remains fairly light for the first full week of May.

Chinese Yuan (CNH) Forecast – Yuan at High Risk amid Liquidity, Econ Data and Commodity Volatility

Both the onshore (CNY) and offshore Yuan (CNH) closed at a slightly higher levels against the US Dollar on Friday, following the biggest move in Yuan’s daily reference rate set by China’s Central Bank in over 10 years.

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A perfect storm has developed for Canadian Dollar bears. In addition to Oil having risen ~70% from the February 11 low and the US Dollar falling to levels not seen since June, the Canadian economy continues to outperform rivals in terms of economic new releases relative to economists’ expectations.

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The Australian Dollar looks set for another week of breakneck volatility as another round of high-profile event risk comes across the wires.

Gold Forecast – Gold Price Surges to Largest Weekly Gain in 11 Weeks

Gold prices surged to the largest weekly gain of the past 11 weeks on the heels of the Fed doing nothing.

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Though still early yet, there have been some remarkable change in trend recently. Dollar is in retreat with the S&P 500 starting to slip. The Yen has surged while Gold has hit 15-month highs. Is something bigger stirring in the markets?

US Dollar Forecast – Dollar Struggles as Rate Disbelief Lingers, Euro and Yen Gain Ground

The Dollar dove to end this past week at its lowest level in 11 months. The extension of the currency’s slide from its 13-year high set back in late January (now down over 4.5 percent) was fueled by a distinct loss of traction in rate forecasts.

Euro Forecast - EUR/USD Showing Strength, But Data Still a Mixed Bag

The Euro just capped off a fairly strong week, rising against every major currency not named the Yen; but that had its own story behind it.

British Pound Forecast - GBP/USD to Face Larger Advance on Lackluster Fed Rhetoric

The slew of fundamental developments coming out of the U.S. economy may play a larger role in driving GBP/USD volatility especially as the U.K. docket remains fairly light for the first full week of May.

Chinese Yuan (CNH) Forecast – Yuan at High Risk amid Liquidity, Econ Data and Commodity Volatility

Both the onshore (CNY) and offshore Yuan (CNH) closed at a slightly higher levels against the US Dollar on Friday, following the biggest move in Yuan’s daily reference rate set by China’s Central Bank in over 10 years.

Canadian Dollar Forecast - Canadian Dollar Retains Upside Risk on Consistent Data Beats

A perfect storm has developed for Canadian Dollar bears. In addition to Oil having risen ~70% from the February 11 low and the US Dollar falling to levels not seen since June, the Canadian economy continues to outperform rivals in terms of economic new releases relative to economists’ expectations.

Australian Dollar Forecast - Australian Dollar Volatility to Continue on RBA, US Jobs Data

The Australian Dollar looks set for another week of breakneck volatility as another round of high-profile event risk comes across the wires.

Gold Forecast – Gold Price Surges to Largest Weekly Gain in 11 Weeks

Gold prices surged to the largest weekly gain of the past 11 weeks on the heels of the Fed doing nothing.

EURUSD
NY

Movers

EUR/USD

The Euro traded higher yesterday and managed to regain the 1.1300’s area, which keep the med-term outlook bullish in the single currency. However, and looking at the near-term price action, a daily close above 1.1350 is needed to confirm another leg higher in the direction of 1.1400 psychological barrier.

In the flipside, 1.1270 former resistance, turned support by now and as far as the Euro keep trading above this level, another extension higher is likely in the coming hours.

To conclude, the trend remains bullish in the daily and we believe that the recent correction has ended, therefore the pair should trade higher by the time being unless we see a close below 1.1216 low in a daily basis.

Support: 1.1270-1.1240-1.1216

Resistance: 1.1340-1.1380-1.1400