Never ending Aussie

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USD: There will be some focus on the minutes to the last FOMC meeting held 19-20 March for clues of future policy direction, but dollar impact should be limited.

EUR: No major data releases, just production data both in Italy and Portugal. The focus continues to be the impact from the weaker yen, with the single currency proving to be one of the main beneficiaries.

Idea of the Day

The Aussie making fresh 11 week highs overnight and is once again “defying gravity”, in the words of Treasurer Swan. As we were pointing out last year, the Aussie is trading far less like a traditional commodity currency, with the correlation between the Aussie and global commodity prices having plummeted from a peak of 0.80 at the start of last year down to 0.21 today (S&P Commodity price index, 3-month rolling).




Two factors have been at play recently.  Firstly, the fresh impetus given to carry trades in the wake of the Bank of Japan decision last week. Secondly, the latest signs of continued buoyant demand in China, the latest example being the trade data overnight. Many are questioning the reliability of these numbers and even though export numbers have fallen short of expectations after a strong run of outperformance, questions remain.

For Australia though, the volume of coal exports (its biggest export) to China is up 30% over the past year (or 87% if you take 1 year change in 12-month average), so the gearing towards Asia and China in particular continues to reap benefits.  Next key upside focus for AUDUSD is year high at 1.0599.

More: See how to trade the Australian Employment Change with AUD/USD

Latest FX News

GBP:  The stronger production data and weaker trade did not given sterling the impetus needed to sustain a rally, with the GDP estimate from the NIESR think tank suggesting marginal growth of 0.1%. Official data is released later this month.  EURGBP continues to look firm, with 0.8590 the next level in sight on the upside.

JPY:  After the volatility of recent sessions, USDJPY was relatively constrained during Tuesday, with 99.66 the initial target ahead of the 100 level.  The interesting thing is that (before the BoJ decision of last week) USDJPY buying continues to be concentrated during the European and NY sessions, but there are signs that this could be changing, especially given the new fiscal year in Japan.

EUR: Against the dollar, the single currency managed to hold its ground during Tuesday, with the 1.30 level holding in place for the time being.  EURJPY also proved to be a touch reluctant to push above the 130 level.

Further reading: AUDUSD Turns Back In Bullish Mode As Price Exceeds 1.0500 (Elliott Wave)

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