BestExchangeRates FX Notebook

Australian Dollar At Risk Of Major Selloff Amid RBA Rate Cut

February 6th, 2012

Although the Australian dollar had a great run coming into February, we expect the high-yielding currency to come under pressure next week as the Reserve Bank of Australia is expected to lower the benchmark interest rate from 4.25%. According to Credit Suisse overnight index swaps, investors are pricing a 79% chance for a 25bp rate cut, while market participants see borrowing costs falling by nearly 100bp over the next 12-months as the central bank tries to shield the $1T economy.

At the same time, 24 of the 27 economists polled by Bloomberg News expect to see the RBA lower the cash rate to 4.00%, but we may see central bank Governor Glenn Stevens talk up speculation for lower borrowing costs as the slowing recovery dampens the outlook for inflation. As the slowdown in global trade paired with the ongoing turmoil in the euro-area dampens the prospects for a more robust recovery, we expect the central bank to maintain a dovish tone for monetary policy, and Mr. Stevens may continue to strike a cautious outlook for the region as the central bank anticipates to see slow growth in China – Australian’s largest trading partner. In contrast, Australian Treasurer Wayne Swan argued that there is too much focus on the downside risks for the economy as he expects to region to withstand ‘the worst the world can throw at us.’ In turn, the encourage comments by Mr. Swan may lead the RBA to soften its dovish tone for monetary policy, but the central bank may show an greater willingness to cut borrowing costs further in order to stem the downside risks for the region.

Read full article at dailyfx.com

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AUD long term fade according to Westpac

December 22nd, 2011

There are signs a bigger fall is coming in the Aussie, says Westpac. Strategists at the firm see a constant flee of longer term investors out of the AUD, with long-term investors cutting AUD exposure by 38% from peak levels back in May. “The message from our client flows at the moment is that AUD strength is a fade,” says Westpac.

fxstreet.com

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Oz Dollar dips below parity on Europe gloom

December 14th, 2011

The Australian dollar has dipped below parity after more gloom about the euro zone debt crisis and disappointing local consumer confidence data. In early trade this morning the dollar fell as low as 99.80 US cents, down from $US1.0083 at 5pm on Tuesday. The dollar climbed back above parity before taking another turn down to 99.93 US cents after data showes local consumer confidence plunged in December despite two RBA rate cuts.

HiFX senior trader Stuart Ive said the local currency was being driven by generally pessimistic sentiment from the euro zone, despite some positive statements from the US central bank. “There was an article out on Reuters saying that Angela Merkel said she would not support any more funding for the European bailout fund,” Mr Ive said from Auckland. “The market reacted very quickly to that, and it influenced the euro and this flowed on to the Australian dollar.

“We also had the FOMC (Federal Open Market Committee) rates decision this morning, noting that the US economy had improved slightly, but that things remain very fluid, and they’re keeping a close eye on Europe – so there was no change in policy.”
Mr Ive said he expected the Australian dollar to remain low throughout the day.

“We’re getting close to levels with the Australian dollar and the euro that we might see some more active selling,” he said.
“The sentiment for these markets is still on the downside, even though there was some slightly better news with bond sales in Italy and Spain, they’ve not been reflected in the market.” Looking ahead, Mr Ive said he thought there could be some movement in the Australian dollar after a speech by Reserve Bank of Australia deputy governor Ric Battellino in Sydney at lunchtime.
“If he makes any statement about monetary policy in Australia, we would expect the market to move on that,” Mr Ive said.

AAP

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Technical Outlook for Major Currencies

December 12th, 2011

GBP/USD: The market correction out from the recent lows at 1.5420 appears to have finally stalled out and we will be looking for a daily close back under 1.5560 to confirm bias and accelerate declines. A close below 1.5560 should accelerate declines towards 1.5420, below which will open an even deeper setback to retest critical support by the October lows at 1.5270. Ultimately, only back above 1.5800 would delay and give reason for concern.

USD/CHF: The recent break above the critical October highs at 0.9315 is significant and now opens the door for the next major upside extension over the coming weeks back towards parity. Daily studies are looking slightly stretched at current levels, so we would not rule out the potential for some corrective selling, but ultimately, look for any setbacks to be well supported in the 0.9000 area, where a fresh higher low is sought out.

AUD/USD: Any rallies are classified as corrective and we continue to see this market in the process of carving out a major top ahead of the next downside extension back below the critical lows from October at 0.9385. The latest bout of consolidation has been broken and it now looks as though a fresh lower top is attempting to establish by 1.0380 following the break back below 1.0270. look for an acceleration of declines from here back below parity and towards 0.9660 which guards against the critical October lows at 0.9385. Ultimately, only back above 1.0380 would delay outlook.

NZD/USD: Any rallies are classified as corrective, with the market still locked within a well defined downtrend. As such, we would expect to see the latest bounce well capped below 0.7900 on a daily close basis in favor of the next major downside extension back towards and eventually below 0.7370. Ultimately, only a daily close back above 0.7900 would delay outlook and give reason for pause.

USD/CAD: Despite the recent pullbacks, our constructive outlook remains intact with the market focused on a retest of the key October highs by 1.0660. From here, look for any interday pullbacks to be very well supported above 1.0000 on a daily close basis, in favor of an eventual break and fresh upside extension beyond 1.0660. Thursday’s daily close back above 1.0225 confirms and should now accelerate towards our 1.0660 objective.

EUR/JPY: The latest break back below the daily Ichimoku cloud delays any hopes for a meaningful recovery on the cross and opens the door for a more significant decline back down towards critical support by the recently established multi-year lows at 100.75. However, there is some evidence of a bullish reversal following some constructive price action in the previous week, but a break and close back above 105.70 would be required to negate bearish outlook and relieve immediate downside pressures.

GBP/JPY: This market could be in the process of establishing a major base following the September break to record lows. However, the latest round of setbacks will need to hold above 119.00 (key 78.6% fib retrace) on a weekly close basis for this newly adopted constructive outlook to remain intact. Look for a daily close back above 122.70 to confirm successful defense ahead of 119.00 and open the door for a bullish resumption. Otherwise, we could see risks for acceleration to fresh record lows below 116.80.

US DOLLAR INDEX: The market is expected to remain very well supported on dips after showing some clear signs of a material base in the previous month. Key previous multi-week range resistance turned support was successfully defended in the 9,400 area, and from here, we look for a fresh medium-term higher low ahead of the next major upside extension back through 10,135. Ultimately, only a close back below 9,400 would give reason for concern, while intraday setbacks should find fresh bids towards 9,800.

http://fxcm.com

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