News & Data:
The main event overnight was the RBA cutting the key rate by 25 bps and though it was not a surprising decision like the recent Bank of Canada cut, many did expect that the bank will leave rates unchanged today. The statement was pretty dovish and clearly highlighted that the RBA is expecting weakness in the near-term, with unemployment slowly increasing and weak domestic demand. They did include the usual comment about the AUD being too strong and noted that an even lower exchange rate is needed to boost the economy. AUD/USD dropped from 0.7810 to 0.7680 immediately after the decision and continues to post fresh lows as we are heading towards the European open. The pair will likely find some decent support ahead of the 0.75 level, but the Monthly chart suggests the next significant support lays at 0.70.
EUR/USD had another quiet session, consolidating in a 1.1325-50 range. With the market focused on Oil and the commodity currencies, interest in the Euro was weaker and EUR/USD turnover decreased. Meanwhile, GBP/USD remains weak after it failed to break about 1.51 yesterday. Sentiment remains clearly GBP-negative and further losses seem likely. USD/JPY dropped back below 117.00 amid selling from leveraged names and larger position liquidations in AUD/JPY. The next significant support is noted at 115.85/90.
The Canadian Dollar recovered somewhat yesterday as Oil rallied. USD/CAD fell from 1.2773 to a low of 1.2554. Overnight, the pair bounced back above 1.26 as the CAD weakened along with AUD and NZD. The medium-term outlook for CAD remains negative, but with the pair up almost 1000 pips in less than one month, we could see some profit-taking very soon.