OPENING COMMENT
The big news in the Asian session came from Australia after the RBA came out with an unchanged verdict at 3.00% as was widely expected. However, the Aussie was offered immediately following the event risk with the accompanying central bank language showing the central bank inclined to leave their neutral policy intact after many hawks had been expecting a slightly more restrictive stance. Additionally, there was no indication given for any potential rate hikes down the road. While the RBA conceded that the local economy was stronger than expected, they felt that inflation would continue to moderate. Australian data was mixed with a better than expected building approvals and a weaker current account deficit. In Japan, DPJ head Hatoyama said that he was planning to review the FY2010 budget projections and start from scratch. US equity futures now point to a slightly firmer open, while commodities are also mildly bid. Looking ahead to Europe, there are a number of releases expected including, Swiss GDP (-3.0% expected) at 5:45GMT, German retail sales (0.7% expected) at 6:00GMT, Swiss PMI (46.9 expected) at 7:30GMT. In the UK, mortgage approvals (50.1k expected), net consumer credit (0.1B expected) and PMI (51.5 expected) are all due at 8:30GMT.
ANALYSIS OF SELECTED RATES
Gbp/Aud: This cross remains under pressure with the market continuing to post fresh 2009 lows. However, the longer-term technical outlook favors a potential bottom at current levels with the market very well supported on a cyclical basis below the 2.00 handle. Daily studies are also looking stretched with the RSI just over oversold readings. We will look to take advantage of another dip on Tuesday to set up a playable counter-trend trade. The daily average true range comes in at 215 points and this would project a potential low into the lower 1.9100’s. A push into the lower 1.9100’s will also force an official RSI dip below the critical 30 level, to make a long trade highly attractive. Fundamentally, the fallout from today’s RBA rate decision could very well be the catalyst for our trade. STRATEGY: BUY @1.9185 FOR AN OPEN OBJECTIVE, STOP @1.8985. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM) ON TUESDAY.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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