The big move overnight in currencies came from the Australian Dollar. AUD fell to a low of 1.0114 after building approvals fell for the second straight month. The number came in at -2.4% in January, compared to the expectation of a rise of 2.8%. This pushed the AUD to a five month low and this happens a day before the RBA has it’s rate decision meeting.
While most analysts expect the central bank to keep rates at 3%, if Governor Stevens believes the economy is below trend, a surprise cut could occur. It is expected that the RBA will move to cut rates to 2.75% in the second quarter this year, a rate move could happen earlier. Support for the AUD is at 1.0100, then 1.0080. Resistance is at 1.0175 and 1.0210.
A quiet overnight in the EUR as the currency straddles the 1,3000 level, after the release of the unemployment number in Spain. Unemployment in Spain increased by 59,400, which was less than the 77,500 expected. Also being released the is morning was Eurozone March Sentix Investor confidence which came in at -10.6, which was much worse than the February number of -3.9, and the expected consensus of -5.2.
Adding to the continued pressure in the EUR has been the fact that there have been no signs of progress in Italy regarding a new government. On a technical basis, the EUR shows support at 1.2970. A break there will target 1.2930. Resistance remains at 1.3040 and 1.3065.
The British Pound lost the 1.5000 handle briefly this morning after release of construction PMI showed a fall to 46.8 in February, the lowest number since October 2009. The January number was 48.7, and February’s number was lower than the 49.0 forecast. Adding to pressure on the GBP is a report that the Bank of England is considering adding more stimulus at this week’s central bank meeting. The ECB is also scheduled to meet this week and traders will closely watch the press conferences following both meetings.
In Japan, the BOJ nominee Kuroda has pledged to “do whatever he can do”, to end deflation and has expressed confidence that Japan can meet the 2% inflation target. He also commented that currencies tend to fall for countries that ease monetary policy on a large scale. JPY traded in less than a 50 point range overnight currently near 93.60. Resistance appears at the 93.75 level, followed by 94.00. Support is at 93.30 and 93.05.
The latest CFTC data shows that EUR, GBP and CAD positions have changed sharply in the week of February 26. EUR positions turned to 9,400 net short contracts down from 19,100 long the prior week. This was the third fall in EUR positions, finally turning back to the short side after positions had been long for seven weeks. GBP positions have fallen to 36,100 in short positions. In December positions had been 37,300 long. CAD positions fell to 21,400 short from the prior week of 19,400 long the week before. Given these position changes, it would be expected to see EUR test 1.2950 this week, GBP break through 1.5000 and test 1.4975 and CAD look to move towards 1.0350.
Look for pressure to remain on the currencies today. As stated earlier, ECB and BOE meet this week as well as the BOJ and BOC. Traders will be looking for any indications from these meetings about future rate moves.
Further reading: The dominant dollar
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