AUDUSD - range top holds
The Aussie Dollars average true range on the daily charts is at its lowest in many years as I have noted before and while periods such as this can persist for some time eventually a break is going to occur. Given what is happening in other markets like stocks the betting would probably be for an eventual move higher - but the rang top has to break first and with a high over night at 1.0484 the top of the box at 1.0489 remains solid for now.
Yesterday's GDP outturn wasn't too bad really in the context of the performance of markets in competition with the Australian dollar for funds but as RBA Deputy Governor Phil Lowe pointed out in his speech overnight "What is normal" the new normal for Australia is different to what it was in the past and that means lower rates and the fact that the RBA sees the "Credit Boom" as responsible for much of the weakness in the economy at the moment and it is not about to step up to reignite this boom.
This is important because I think it means they will cut slowly and cautiously unless there is an economic catastrophe here in Australia or offshore but equally there is clearly room for more cuts because Lowe stressed that,
the normal level of the cash rate is lower than it otherwise would have been. A 3 per cent cash rate today is not the same as a 3 per cent cash rate in the past
Looking at the charts frankly I don't have a lot and probably prefer playing other markets today - the AUD does however feel like it is biased back toward 1.0440 and then 1.0400/10.
EURAUD - consolidating still
The single hardest thing I ever do in FX markets is buy Euro or be bullish - subjective of cause and often rhetorical - because I can't see how the EURUSD is worth more than 1 USD let alone how it can be floating around 1.30 when the US is healing and Europe is kicking the can of its disease down the road.
So the pullback overnight in the EURUSD feels like it was the right kind of price action and even though my trend following systems went long (with stops) EUR my comments that 1.3170ish has to give way to get me subjectively bullish remain.
Once again it was Euro specific action that drove EURAUD but as you can see in the chart above the overall uptrend has stalled a little around this 61.8% retracement level of the recent sell off but a break of 1.2438 is needed to turn the outlook lower again.
AUDJPY - rally after BoJ hints at more stimulus
The NAB reported that overnight, dovish comments from BoJ deputy governor Nishimura that the central bank will debate whether its monetary easing in September and October was enough to support the economy, which may be undershooting its projections. The BoJ next meets on December 19-20 (3 days after the general election) and we can probably now bank of further easing measures.
Now I'm in the camp that says that USDJPY is going higher much higher - 99 eventually so the trade aspect of the lower USDJPY call - or at least the fact that the recent high has been a good level to run shorts against with an obvious stop is an uncomfortable position in the overall bullish stance that I hold.
Likewise I am an AUDJPY bull given I think that the AUD will be stronger for longer and that I reckon USDJPY is going higher. So my trade in AUDJPY is against my subjective view.
But that is the inbuilt tension with rhetoric and trades isn’t it? The highs in USDJPY and AUDJPY were great places to trade short off but if the recent high at 86.42 + 13 points for 86.55 gives way then I will be stopped out and go flat.
AUDNZD - Finally some action
The RBNZ delivered its Monetary Policy Statement this morning and it certainly sounded like they are thinking of increasing rates eventually. RBNZ Governor Wheeler said in the statement,
The overall outlook is for stronger domestic demand and the elimination of current excess capacity by the end of next year. This is expected to cause inflation to rise gradually towards the 2 percent target midpoint.
Monetary policy remains focused on keeping future average inflation near the 2 percent target midpoint. The Bank is closely monitoring indicators for any sign of further moderation and is mindful of recent downside surprises to employment and inflation outturns. With the reconstruction-driven pick-up in investment now clearly underway, the Bank will also continue to watch for a greater degree of inflation pressure than is assumed.
On balance, it remains appropriate for the OCR to be held at 2.5 percent.
Consequently the NZD rallied and the AUDNZD has fallen and at 1.2621 as I write is now back testing the bottom of an old trend line stretching back into 2009 and the low of 1.2610 was only marginally above the 50% retracement of the recent rally at 1.2601. As I wrote the last few days a break of either side of the range I would go with so now that 1.2652 has given way the focus is on further downside consolidation for this pair.