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RBA Holds Rates, Fails to Hold Aussie; US Dollar Under Pressure

RBA Holds Rates, Fails to Hold Aussie; US Dollar Under Pressure

2013-12-03 14:00:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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Talking Points:

- The RBA held its main rate steady and tried to weaken the Aussie verbally.

- European currencies back at September/October 2008 highs versus Yen.

- Markets look to quiet ahead of event risk Wednesday through Friday.

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INTRADAY PERFORMANCE UPDATE: 13:00 GMT

MAJORS

AUD

CAD

CHF

EUR

GBP

JPY

NZD

(vs USD)

+0.23%

-0.12%

+0.44%

+0.26%

+0.34%

+0.35%

+0.73%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.24% (-0.10% prior 5-days)

ASIA/EUROPE FOREX NEWS WRAP

Higher yielding currencies are moving higher on the day although the same cannot be said about risky assets in general. US equity futures are slightly lower on the day and US yields are rather mixed. ‘Mixed’ would also be the best way to describe the US Dollar’s performance over the past several days, it having moved in an approximate 0.7% trading band since November 21.

The main push against the US Dollar today comes not from European FX (although they remain in the thick of things) but rather from the Tokyo session currencies. Of note, the Australian Dollar, after diving back to last week’s lows under $0.9060, has rebounded across the board in tandem with the New Zealand Dollar. The Reserve Bank of Australia kept its main refinancing rate on hold at 2.50% last night, and traders have thus far shrugged off commentary that the Aussie remains overvalued.

RBA_Holds_Rates_Fails_to_Hold_Aussie_US_Dollar_Under_Pressure__body_Chart_1.png, RBA Holds Rates, Fails to Hold Aussie; US Dollar Under Pressure

With perhaps a bit of short covering occurring in the commodity currencies after several days of weakness, a backdrop of steady or weakening US yields today or tomorrow might afford a bit of upside in the AUDUSD the next few days. While we remain bearish on the AUDUSD (given general upside pressure on US yields past week, month, and quarter), a rebound today could offer an opportunity to resell the currency higher:

AUDUSD Daily Chart: July 19 to Present

RBA_Holds_Rates_Fails_to_Hold_Aussie_US_Dollar_Under_Pressure__body_Picture_1.png, RBA Holds Rates, Fails to Hold Aussie; US Dollar Under Pressure

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- The AUDUSD has carved out a sideways channel the past four days, between $0.9050 and 0.9160.

- The daily 8-EMA has been respected thus far as resistance during the downtrend the past three weeks.

- A close above the daily 8-EMA (0.9145) would give room for the pair to rebound back into a familiar supply/demand zone since July, between 0.9210 and 0.9280.

- Given the nature of the decline, preference is to sell rallies rather than buy dips.

- Ideal selling zone over next few days: 0.9250/55 (21-EMA) to 0.9280 (descending TL off of October 23 and November 20 highs).

ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION

There is no data on the North American economic calendar for Tuesday, December 3, 2013.

See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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