News & Data:
The main event overnight was the Australian CPI release. While the headline number missed expectations slightly, the trimmed and weighted figures came in higher than expected. However, the downward revisions to Q3 of last year leave the year-end prints at 2.2 % and 2.3 % respectively, which is pretty much in line with the RBA forecasts. Mixed data overall, but the price action in AUD/USD suggests that the market was caught a bit too short at low levels. All in all, most banks expect that the RBA will cut rates in the coming months.
AUD/USD rallied to 0.8010 from a low of 0.7900 ahead of the data release. Decent selling interest reported at 0.8050-60, which is the next major hurdle for AUD bulls. Dealers saw good buying from leveraged names in AUD/NZD, which rallied over a 100 pips up to 1.0750. Meanwhile, the NZD/USD remains quiet ahead of the RBNZ meeting tonight.
The EUR/USD short squeeze extended in yesterday's NY session, but momentum waned as we went into the Sydney open. 1.1250 is now the pivotal short-term support level, while 1.1480/1.15 will be a tough resistance area, as selling interest remains high overall.
It almost looked like USD/JPY will finally break out of it's 117.20-118.80 range yesterday, but the pair bounced off 117.30, inspired by the recovery in the US stock indices. Heading into the London open, we are again in the middle of the range, around 118.10. Further consolidation seems likely for today, but perhaps the FOMC minutes will finally bring some momentum and push the pair out of the current range.