Aussie slammed lower after RBA sits on the fence

Reserve Bank of Australia

What Happened Yesterday

There wasn’t a lot of activity scheduled yesterday but what did come up had an impact.

The AUD was sold off after the RBA showed no signs it was ready to join the rhetoric of the ECB, BOE and BOC. The RBA statement was another cut and paste job from last month and the market didn’t take it too kindly belting it down almost a cent.

Sterling is showing signs it is almost back to normal after the Brexit/terrorism issues over the past month. It drifted lower again after weaker Construction data. That’s back to back weaker then expected results, if we get another we could see a break back down through 1.2900 support.

Last but not least in a quiet North American session the BOC gov Poloz was at it again talking up the prospects of higher rates in Canada.

Poloz told German newspaper Handelsblatt, Inflation in Canada should be well into an uptrend by the first half of 2018, adding that policy normalisation must begin before price growth hits its target.

USDCAD which was edging up towards 1.3020 was quickly belted down 100 points to 1.2910. There is still time to get on the CAD band wagon and I’ll be looking for good levels to get short.

Friday’s Canadian Employment data just took on greater importance. If it’s strong then the rate hike in July is a definite (if not already) and USDCAD will be sold off further. If it’s weak then we may just get our chance to get short higher up.

What’s Happening with the Majors

There wasn’t a huge amount of activity and that was to be expected with the US holiday and all.

The AUD and the CAD were the clear standouts.

The AUD coming off 90 points after the RBA release. I think it was an over reaction but it does fit in with the slightly stronger USD at the moment.

The CAD rallied 100 points after Poloz’s remarks in the German newspaper. He definitely wants the market to know they are ready to move.

The EUR and GBP drifted lower in thin trading but there wasn’t much in it.

USDYEN continued to climb albeit 1 pip per hour. It may be slow motion but it’s effective.

The NZD drifted lower with the AUD and it didn’t seem to react too much to the slightly weaker Global dairy prices.

Major Currencies in Play Today

GBPUSD

Technical Set Up: We have a clear support trendline coming in at 1.2900 at the moment.

Fundamental Driver: UK Services PMI

Potential Strategy: Break trade to the downside. Today’s UK Services PMI is the 3rd UK number this week. The previous 2 were worse then expected. If it comes in weak then we should get a break of 1.2900 trendline & psychological support, where large stop loss orders will be sitting.

Today’s Fundamental Drivers

The UK services PMI doesn’t come up on this calendar but because the other 2 releases this week have been weak it is now of high importance.

A lot of the calendars don’t factor that in!

The Next Best Trade

We’ve got two long term pending orders in play. Poloz’s comments didn’t help the chnace of the CAD getting set but it’s not over til the fat lady sings, as they say.

I’ll be adding to the NBT today…stay tuned.

If you have any good trade ideas be sure to post them below…I’d love to get your take on the market!

Brad

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