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Aussie Rebounds As USD Meaningfully Weakens

Aussie Rebounds As USD Meaningfully Weakens

2013-07-16 16:35:00
Kevin Jin,
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THE TAKEAWAY: US June CPI accelerates to +1.8%, higher than the expected +1.6%> RBA Minutes reiterate that the policy stance is appropriate

The evident theme today is dollar weakness. The Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) falls -58 (-0.53%) to $10818 at the time of writing. Interestingly, the dollar declines occur amidst strong US Consumer Price Index numbers: +1.8% June y/y actual; +1.6% Bloomberg News survey expected. Recall that while the majority of Fed members seem to hint at tapering sometime soon, some Fed members such as James Bullard are calling for a stronger defense of the 2.0% inflation target and thus prolonging asset purchases. Subsequently, some may conclude that the higher than expected CPI print today may dampen the need for a delayed taper. On the other hand, it seems that the higher than expected inflation reading today may have been due to volatile energy and food prices. The CPI Ex Food and Energy comes in at +1.6% June y/y, in line with Bloomberg News survey expectations.

In the Asia-Pacific, the Reserve Bank of Australia releases Minutes from its July 2 meeting. The “Considerations for Monetary Policy” portion of the Minutes seem to mostly reiterate statements from the last Minutes which comment on falling commodity prices in congruence with the largely weakening AUD. Similar to last meeting, this month’s Minutes state, “it [is] possible for the exchange rate [to] depreciate further over time as the terms of trade and mining investment [decline], which [will] help to foster a rebalancing of growth in the economy.”

A broad view of markets shows Eurozone bonds trading slightly stronger while global equities weaken. In equities, Asia leads the way: S&P -0.42%; Euro Stoxx -0.78%; FTSE -0.45%; Nikkei +0.64%; Hang Seng +0.04% at the time of writing. In commodities, crude oil trades flat while base metals continue to fall: WTI -0.10%; Brent +0.12%; LME Copper -0.53%; COMEX Copper +1.07%; Shanghai Copper +0.10% at the time of writing. Lastly in the bond market, 10YR government bond yields trade as follows: US +0.0bps (+0.00%) to 2.537%; Germany -2.8bps (-1.77%) to 1.549%; Spain -3.7bps (-0.78%) to 4.671% at the time of writing.

AUDUSD 15-minute Chart: July 16, 2013

Aussie_Rebounds_As_USD_Meaningfully_Weakens_body_Picture_4.png, Aussie Rebounds As USD Meaningfully Weakens

Charts Created using Marketscopeprepared by Kevin Jin

The AUDUSD is the strongest performer today, gaining +1.38% at the time of writing. The pair increased sharply during the Asian session. The increase coincided with the release of the RBA Minutes which did not provide any meaningful new statements regarding additional rate cuts. The pair exhibited minimal selling pressure throughout the trading day although it met some resistance at $0.9232.

GBPUSD 15-minute Chart: July 16, 2013

Aussie_Rebounds_As_USD_Meaningfully_Weakens_body_Picture_3.png, Aussie Rebounds As USD Meaningfully Weakens

Charts Created using Marketscopeprepared by Kevin Jin

The GBPUSD is trading mixed today, gaining just +0.09% at the time of writing. The sterling declined against most other major currencies today (at the time of writing). Most of the selling pressure occurred near London Open with a +50 pip rebound early into the London session. This curious price action happens before the first Bank of England Minutes release under new Governor Mark Carney.

EURUSD 15-minute Chart: July 16, 2013

Aussie_Rebounds_As_USD_Meaningfully_Weakens_body_Picture_2.png, Aussie Rebounds As USD Meaningfully Weakens

Charts Created using Marketscopeprepared by Kevin Jin

The EURUSD is nearly +100 pips stronger today, gaining +0.61% at the time of writing. The pair was able to move through $1.3100 with little resistance and approaches $1.3050 past London Close.

USDJPY 15-minute Chart: July 16, 2013

Aussie_Rebounds_As_USD_Meaningfully_Weakens_body_Picture_1.png, Aussie Rebounds As USD Meaningfully Weakens

Charts Created using Marketscopeprepared by Kevin Jin

The USDJPY is -0.55% lower at the time of writing, highlighted by a failed move above ¥100.00 near Asian Open. The buying pressure in the pair was relatively low today, with a minor bounce in the pair after the US released higher than expected CPI data at 12:30 GMT (8:30 EDT on chart above).

--- Written by Kevin Jin, DailyFX Research

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

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