Aussie poised for break out as markets turn to quarterly inflation report

AUD / USD

Expected Range: 0.7285 – 0.7680

The Australian dollar rebounded strongly through trade on Tuesday breaking back through 0.75 U.S cents and touching intraday highs at 0.7541. Investors were buoyed by suggestions the Bank of Japan would fail to meet stimulus expectations and the AUD found support on demand for carry trades. Driving higher the AUD rally stalled on moves approaching 0.7545 as markets prepared for todays all important quarterly CPI print and FOMC rate statement. The quarterly inflation indicator is a critical marker in determining future RBA policy moves. A poor read will add credence to calls for an additional rate cut and could see the RBA board reduce rates as early as August.  With the Aussie poised to break into a significant bearish channel todays print is extremely important in determining short term direction with supports at 0.7285 - 0.7300 to be tested should the data fail to fall within the target band. 

NZD / USD

Expected Range: 0.6930 – 0.7180

The New Zealand dollar rallied through trade on Tuesday bouncing back through the psychological 0.70 handle and touching intraday highs at 0.7085. The Kiwi found support in carry trade demand as investors scrambled to reposition expectations surrounding Japanese fiscal and monetary stimulus after Finance Minister Taro Aso downplayed suggestions of close integration between the government and Central Bank. With little of note on the domestic docket today attentions will turn to the FOMC rate statement and Federal Funds Rate announcement. Investors will be keenly attuned to any hawkish undertones following a string of stronger U.S macroeconomic indicators. An upbeat Fed will fuel speculation a December rate increase is on the table and possible prompt a move back below 0.70 and technical support at 0.6930.  

GBP / AUD

Expected Range: 1.7050 – 1.7950

The Great British Pound offered little to excite investors when compared with its US counterpart through trade on Tuesday. Sterling edged marginally higher throughout the day touching intraday highs at 1.3173. Investors appeared reluctant to stimulate any meaningful moves outside recent trading bands ahead of key quarterly GDP numbers and an all-important FOMC rate statement. Having lost ground against the AUD and NZD on carry trade demand attentions turn to Australian inflation numbers for direction into the European trading session. 

USD, EUR, JPY

The Greenback slipped through one week lows when compared with its safe haven counterpart, the Japanese Yen, on Tuesday. Markets repositioned themselves paring recent USD gains as expectations the Bank of Japan will inject aggressive new stimulus measures subsided. Comments from Japan’s Finance Minister suggested ties between BoJ and Government stimulus strategies were tenuous, dampening hopes of a closely integrated monetary and fiscal policy platform. With growing suggestions the BoJ may disappoint and fail to meet market expectations the Yen rallied through 104.50 and 104.00 touching intraday highs at 103.99 before profit taking and supports ended the Greenbacks precipitous slide. Attentions now turn to key central bank announcements. The Federal Reserve and FOMC will deliver their rate decision and accompanying statement today with many anticipating maintenance of the status quo with a hawkish lean or bias in the supporting commentary. An upbeat Fed will help fuel renewed interest in a December rate adjustment and could prompt a Bullish swing.