Expect more range trading, EUR/USD Could Test 1.32
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Expect more range trading, EUR/USD Could Test 1.32

Following another strong day in the US equity markets, which saw the DOW set another record, closing at 15,105, both the AUD and the NZD moved higher in overnight trading. The AUD was helped by unexpected growth in employment. Job data showed an increase of 50,100 in April versus and expectation of 11,500. Unemployment in Australia fell to 5.5%.

New Zealand employment grew 1.7% in the first quarter of 2013, against an expectation of 1.1% and unemployment dropped to 6.2% from 6.8%. The Australian Dollar gained almost one cent moving from a low of 1.0160 to a high of 1.0253. The NZD also moved back from yesterday’s low of .8360 after RBNZ intervention to a high of .8480 before settling back towards the .8450 area.

Following the lead of the other commodity currencies, the USD/CAD has continued moving lower overnight, touching the 1.0015 support level and looking as if the move towards parity is certain to happen sometime later this week. More:  USD/CAD: Trading the Canadian Employment Change

Support at the present time is at 1.0000, followed by .9985. Resistance is seen at 1.0030 and 1.0050. Hourly technicals do show the RSI moving towards the 30 level, which would indicate the currency pair is getting close to being oversold. An RSI below 30 indicates an oversold situation and makes it more difficult for a currency pair to continue lower. It also sets the pair up for a quicker move higher on short covering.

In other currency news, here in North America, the Mexican Peso has strengthened after the FItch Ratings agency raised Mexico’s credit rating to BBB+ from BBB. The Peso moved to its strong level since August of 2011, cracking the 12,00 and making a low of 11.95, before easing back slightly but still remaining below the 12.00 level.

The EUR had a very quiet overnight, trading in roughly a 25 point range. After flirting once again yesterday with the long term resistance level of 1.3200, the EUR has eased off into the 1.3160-70 level. More chatter from ECB members, as ECB executive Yves Mersch stated the ECB is not a “toothless tiger”, and that it has the tools needed to effect monetary policy. He also said the ECB would ease further if conditions warranted such a move. The ECB released their monthly bulletin this morning and 2013 GDP estimates were cut to -0.4% from 0%.

As we move into the European market this morning, attention will be focused on the UK, where the Bank of England, will announce monetary policy today. The Bank of England is expected to keep rates unchanged at 0.50%, as well as keep the asset purchase target at GBP 375 billion.

Expect a day of range trading, with another test of the 1.3200 level in the EUR. The other currencies today, such as USD/CAD, AUD/USD and USD/MXN look to be in the spotlight.

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Matthew Lifson

Matthew Lifson

Matthew Lifson is a Foreign Exchange Trader and a Market Analyst. with Cambridge Mercantile Group.