We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
Oil - US Crude
Mixed
Wall Street
Bullish
Gold
Bearish
GBP/USD
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • The trio of central banks overseeing the commodity currencies have already cut their main rates to all-time lows. Get your market update from @CVecchioFX here: https://t.co/OSUXrN5P3j https://t.co/3nwDel6e28
  • The tension from March continues to subside, allowing for the $USD to slide to fresh two-month-lows. Get your currencies market update from @JStanleyFX here: https://t.co/bRSRjUqg6Z https://t.co/Q35YpIZEd2
  • López Obrador hopes #USMCA will help tighten trade relationships between the US and Mexico. Get your currencies market update from @HathornSabin here: https://t.co/bZrUKSCGaS https://t.co/MZ7UoiWWRj
  • The $AUD may suffer as relations between Australia and China deteriorate amid dwindling growth prospects. Euro traders will be closely watching progress in talks about a €500b recovery fund proposal. Get your market update from @ZabelinDimitri here: https://t.co/LkEFJViPWY https://t.co/sofO135ElG
  • The US Dollar could rise against #ASEAN currencies such as the Singapore Dollar as US-China tensions seem to escalate. The Indian Rupee is also looking ahead of local 1Q GDP data. Get your ASEAN currencies market update from @ddubrovskyFX here:https://t.co/LkEFJViPWY https://t.co/ZGFaQQ3Hr2
  • The #Euro is the big driver here for DXY as it is 57% of the index. It is rising now and trying to break above the March 27 high at 11147. Get your $EURUSD technical analysis from @PaulRobinsonFX here:https://t.co/6gt3F9LuGP https://t.co/73SaL5AeXD
  • U.S. Market Analyst at https://t.co/JsVsSmefgR, Shain Vernier covers - ✔️ Safe haven assets in volatile markets ✔️ Central banks and governments ✔️ How will commodities trade in a recession Only on Trading Global Markets Decoded #podcast. Tune in here: https://t.co/1UmEzEbwiy https://t.co/EIC9YqfTec
  • Anybody else think that casting directors in movies are some of the most underrated people when it comes to giving a film/series credit?
  • No https://t.co/EoBltaP17k
  • Crude #oilprices may face heightened liquidation pressure as the cycle-sensitive #commodity finds itself under the pressure of resilient resistance and a vulnerable, multi-week rising channel. Get your crude #oil market update from @ZabelinDimitri here: https://t.co/cGPX4qcOH1 https://t.co/0U4JMJVFuf
Australian Dollar Sold Aggressively Following Shocking RBA Rate Decision

Australian Dollar Sold Aggressively Following Shocking RBA Rate Decision

2012-05-01 05:56:00
Joel Kruger, Technical Strategist
Share:

- RBA shocks markets and cuts by 50bps to 3.75%

- Decision surprising given RBA track record

- Aussie sold aggressively across the board in response

- China manufacturing PMIs come in weaker than expected

- Yen continues to find bids; but additional upside limited

Trading in May has kicked off with a bang after the RBA came out and shocked markets by cutting rates 50bps to 3.75% (consensus had called for a 25bp cut). Although there was talk of the need for a 50bp cut from the Australian central bank, many, including ourselves, did not believe that the central bank would move so aggressively given their traditionally more hawkish, and less worried outlook for the local and global economy. The shock was therefore not that rates were cut 50bps, but rather that a central bank which has stubbornly erred on the hawkish side throughout the global turmoil, finally relented and woke up to reality. Better late than never, and we fully support the central bank decision and believe there is a clarity finally presenting that had long been absent.

In the accompanying statement, the RBA cited softer economic conditions, housing woes, and a moderation in inflation. We believe that this is a very important decision which will have a wider influence on the market over the coming weeks. The RBA decision reaffirms our core view that we are still not at the end of the global crisis, and only now entering the third and final phase which will intensify in the commodity bloc and emerging market economies. China is at the center of this third phase and ongoing evidence of continued slowdown in the Chinese economy should weigh tremendously on the correlated economies. Australia, the other commodity bloc economies and emerging markets will suffer from this slowdown, and we believe that the best trade going forward is short commodity bloc and EM and long major currencies.

While it is hard to focus on anything else at this point in the day other than the RBA decision, the latest China data should certainly not be ignored, with manufacturing PMIs coming in softer than expected. This further highlights our view, and we suspect that the Australian Dollar still has a good deal of downside ahead, particularly now that interest rate differentials and the negative carry are far less intimidating. Aussie bulls could argue that the rate cut is a positive for risk, as it now makes for a far more accommodative environment which will help to stimulate the economy, but we are not buying into this contention, as we feel the RBA has fallen too far behind the curve and will need to play a game of catch up (perhaps “catch down” is more appropriate).

Elsewhere, it will be worth keeping an eye on EUR/USD to see if the market can still push higher to test key barriers by 1.3300. USD/JPY is also back in the FX headlines with the major pair dropping to fresh multi-day lows back below 80.00. From here, it seems like there is still room for deeper setbacks, but we do not anticipate a retest of the record lows from 2011 and would instead recommend looking for opportunities to buy on dips below 79.00.

TRADE OF THE DAY

Australian_Dollar_Sold_Aggressively_Following_Shocking_RBA_Rate_Decision__body_eur.png, Australian Dollar Sold Aggressively Following Shocking RBA Rate Decision

EUR/USD: (This recommendation was issued last week but the entry and stop have been revised. See below.) Although the latest rally has been impressive, we contend the market is still locked within a more well defined medium to longer-term downtrend off of the 2008 record highs, and as such, looking to sell rallies in 2012 is the preferred strategy. The rally has now extended beyond 1.3200 and from here we see scope for additional upside through 1.3300. However, once the 1.3300 level is tested and broken, there is a very compelling technical argument to be made for a bearish resumption. A closer look at the 1.3300 level shows a confluence of resistance which includes the obvious psychological barrier itself, some falling trend-line resistance off of the February 2012 peak, the upper bollinger band, and a very attractive 78.6% fib retrace off of the most recent March-April, 1.34400-1.3000 high-low move. As such, we really like the idea of fading and overshoots beyond 1.3300 and will place our entry accordingly. STRATEGY: SELL AT 1.3320 FOR AN OPEN OBJECTIVE; STOP-LOSS ONLY ON ANY DAILY CLOSE (5PM NY TIME) ABOVE 1.3420.

ECONOMIC CALENDAR

Australian_Dollar_Sold_Aggressively_Following_Shocking_RBA_Rate_Decision__body_Picture_1.png, Australian Dollar Sold Aggressively Following Shocking RBA Rate Decision

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

To be added to Joel Kruger’s distribution list, send an email with subject line “Distribution List” to jskruger@dailyfx.com

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

DISCLOSURES

News & Analysis at your fingertips.