Tuesday, October 6, 2015

Aussie bulls in control above 0.71 on RBA, German factory orders – Next in focus

FXStreet (Mumbai) - A slew of macro events from the OZ economies dominated the Asian session today, with the much-awaited Reserve Bank of Australia’s (RBA) policy decision turning out to be a non-event, although, the central bank’s status-quo did help to boost the Aussie. While the NZD/USD pair remains supported, despite the weak NZ fundamentals.

Key headlines in Asia

RBA holds interest rates at 2%, further easing conditional

AUD: Trade balance nose-dives, raises rate cut hope from RBA - Rabobank

Dominating themes in Asia - centered on JPY, AUD, NZD

A quiet Asia, with the Asian markets extending gains for the second straight session this week while the USD/JPY pair steadying around 120.50. Markets await the outcome from the immediate two central banks’ events – BOJ and FOMC minutes due tomorrow for further direction on the major.

While the US dollar remains largely subdued against its major competitors, especially the Australian dollar and the NZD, as Friday’s weak US labor market report continues to weigh on the buck.

Besides, the Aussie received major boost from the unchanged policy decision by the RBA, with the pair reaching fresh two-week highs at 0.7135 on the back of the algos-led spike. Markets appear to have completely ignored the awful Aus trade data. The economy posted a trade deficit of AUD 3.095 billion in August, sliding 11% from July's shortfall, missing expectations for a shortfall of AUD2.40 billion.

Meanwhile, the NZD/USD pair struggles near 0.65 handle, retreating from fresh two-month highs, after the NZ business confidence index showed sharp deterioration. The latest NZIER Quarterly Survey of Business Opinion shows business confidence falling to its lowest level since March 2011. The index dropped to -14 against a 5 point reading booked previously.

On the equities space, Asian markets extend the previous rally; with dropping 2015 Fed rate hike bets offering some respite to the corporate world. Japan’s Nikkei rallies 1.31% to 18,242. Australia’s S&P ASX index jumps to 5,171, up 0.40% towards closing hours. While the Chinese markets remain closed in observance of a National Holiday. Hong Kong’s Hang Seng trades modestly flat at 21,872.

Heading into Europe - centered on EUR, GBP

EUR calendar holds limited macro data on the cards, with the German factory orders and the UK’s Halifax HPI expected to keep the EUR, GBP traders busy.

Germany will report the state of its August factory orders, with 0.5% advance expected in August, and 5.6% growth annually. The country reported a 1.4% decline in orders in July m/m, while it saw a 0.6% decline y/y.

Besides, the International Monetary Fund (IMF) will release its World Economic Outlook later in the European session. The IMF has lowered its 2015 global growth forecasts to 3.3%, from the 3.5% projected in April.

The Euro group finance ministers will meet in Luxembourg to discuss a corporate-tax action plan and the Single Resolution Fund for banks. While the ECB Governing Council will meet in Frankfurt for the non-monetary policy discussions.

Moving on, we have an eventful North American session later today, with the trade balance numbers from the US and Canada to be reported, followed by Fonterra’s fortnightly price auction results – GDT Price Index and Canadian Ivey PMI.

While European Central Bank (ECB) President Mario Draghi’s speech at the Art on Site Inauguration event in Frankfurt will wrap up today’s trading session.

EUR/USD Technicals

Valeria Bednarik, Chief Analyst at FXStreet noted, “Technically, and in the short term, the pair has turned bearish, as in the 1 hour chart, the price has returned below its moving averages, whilst the technical indicators maintain their strong bearish slopes well below their mid-lines.”

“In the 4 hours chart, the pair points to close the day below a still flat 20 SMA, whilst the technical indicators turned sharply lower and crossed their mid-lines towards the downside, pointing for a test of the base of its latest range in the 1.1100/20 price zone.”
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