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The Latest FX Leaders (and Laggards)

The Latest FX Leaders (and Laggards)

Boris Schlossberg, Technical Strategist

The Australian dollar has come under pressure following the latest RBA policy announcement, while the euro is pointing higher on the heels of more promising Spanish unemployment data.

The Reserve Bank of Australia (RBA) elected to keep rates on hold at 2.75%, but its dovish stance put pressure on AUDUSD throughout the Asian and early-European trading sessions, sending the pair below 96.50 as the night progressed.

The RBA remained stationary for now, but in its monthly policy statement, RBA Governor Glenn Stevens noted, "At today's meeting, the Board judged that the easier financial conditions now in place will contribute to a strengthening of growth over time, consistent with achieving the inflation target. It decided that the stance of monetary policy remained appropriate for the time being. The Board also judged that the inflation outlook, as currently assessed, may provide some scope for further easing, should that be required to support demand."

Furthermore, despite the significant depreciation in the Australian dollar (AUD), the RBA continued to jawbone the exchange rate lower, stating that, "The exchange rate has depreciated since the previous Board meeting, although, as the Board has noted for some time, it remains high considering the decline in export prices that has taken place over the past year and a half."

The overall tone of the RBA statement put pressure on the Aussie, as it suggested that the central bank remains open to further rate cuts. Furthermore, it continues to pressure the exchange rate lower despite the already substantial decline.

Tonight, the market will get a glimpse of Australia’s Q1 GDP data, and if the news disappoints, AUDUSD could be pressured back below the .9600 level as currency traders begin to price in the prospect of yet another rate cut.

In the meantime, the unit is likely to remain a laggard, especially against the euro (EUR), which was firmer in overnight trade.

Euro Looks Poised for Upside Run

The EURUSD held above the 1.3050 level and rallied towards 1.3080 in quiet European dealing while boosted by a greater-than-expected reduction in Spanish unemployment (-98.K versus -50.2K expected). This was the sharpest decline in unemployment in nearly a year, and it suggests that Europe's fourth-largest economy may finally be turning the corner.

The EURUSD continues to trade well, and if the pair could clear the 1.3100 level in today’s North American session, it could pave the way for a run towards 1.3250 as the combination of better Eurozone fundamentals and the growing market belief that the Fed is unlikely to taper asset purchases anytime soon pushes the pair higher.

See also: 2 Potential Game-Changers for EUR/USD

USD/JPY Rallies After Monday’s Rout

Lastly, USDJPY took its cue from the equity market and rose through the 100.00 level in today’s Asian session as the Nikkei gained 2%.

The US economic calendar is very light today with only the IBD economic optimism survey on the docket, which is unlikely to have much of an impact on trade. However, if the numbers do improve, as expected, USDJPY will likely keep the 100.00 handle as it recovers from yesterday's profit-taking dive.

By Boris Schlossberg of BK Asset Management

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.