Global Markets:

  • RBA’s Stevens: Growth to continue, and strengthen later in the year
  • RBA’s Stevens: Inflation outlook is consistent with medium term target
  • RBA’s Stevens: Lower Aussie dollar, improved global conditions will help growth
  • RBA’s Stevens: Reluctant to draw lines of sand in FX market
  • Asian markets are mixed this morning; Nikkei unchanged on the day, Shanghai Composite down 0.25 %
  • Australia’s ASX index gained 0.75 % on the day while the Hang Seng rose 1.10 %
  • Gold at $1313 (+0.10 %), Silver consolidating around the $20.00 level (+0.10 %)
  • US 10 year yield stands at 2.74

FX Flows/Orders:

  • Fast money accounts were sellers of EUR/USD overnight, but were not able to push the pair much lower than 1.3810
  • Leveraged funds have offers lined up between 1.3840 and 1.3850; dealers note that large selling interest starts at 1.3880
  • To the downside, bids are rebuilding ahead of the 1.3750 level; stops beneath are increasing in size
  • AUD/USD rallying after RBA Governor Stevens‘ speech, slowly approaching the 0.92 level
  • Offers seen 0.9200-10, but unlikely to be much of an obstacle
  • Bearish momentum in GBP/AUD and EUR/AUD is picking up
  • Things remain quiet in USD/JPY with Japanese bids 102.00-10 in good size and offers resting at 102.50; better supply at 102.75 and pre-103.00
  • Volume in USD/CAD has been low during the Asian session; some of the hedge fund bids have been filled overnight and they have more demand towards the 1.1150 level
  • Real Money (RM) funds will be buyers in the low 1.11’s
  • Intraday, not much resistance until 1.1220
  • In GBP/USD, offers from Asian names at 1.6550, stops seen through 1.6560
  • Dealers see 1.6480/85 as decent intraday support area

Market Sentiment:

RBA Governor Stevens did not mention the current level of the Australian Dollar at his speech in Hong Kong, which led to another surge in AUD/USD. With geopolitical tensions easing and the Aussie Dollar resilient to rather weak Chinese data recently, further gains are likely. Several bank analysts see it as possible that we are heading for a test of the 0.95 level soon, which is quite possible should the short covering accelerate. GBP/AUD and EUR/AUD are under renewed pressure with technicals pointing to more losses in the near-term. Bank of America issued a recommendation to clients yesterday to short GBP/AUD at 1.8075 with a 1.8275 stop loss and 1.71 take-profit target.

Comments from ECB Governing Council members drove the EUR/USD lower in the yesterday’s early NY session and most traders were expecting similar comments from ECB president Draghi. Draghi’s first comment that the ECB is ready to take additional monetary policy measures pushed the pair to a fresh low at 1.3750. That was quickly retraced however, as Draghi didn’t say anything new and added later that more evidence of deflation is needed for the ECB to act. The losses in EUR/USD were erased as shorts rushed for the exit and led to a high of 1.3847.

Upcoming Events:

  • 07:00 GMT – German Consumer Climate (8.5)
  • 09:00 GMT – Italian Retail Sales (MoM 0.4 %)
  • 12:30 GMT – US Durable Good Orders (1.0 %)
  • 12:30 GMT – US Core Durable Goods Orders (0.3 %)
  • 13:45 GMT – US Services PMI (54.2)
  • 21:45 GMT – New Zealand Trade Balance (MoM NZ$600M, YoY NZ$490M)