AUDUSD – RBA on hold, Labor party forms government
As expected, RBA didn’t change interest rates, citing uncertainty in global prospects. Weaker US economy and steps taken by the Fed may indeed discourage RBA from further tightening any time soon, but then again, a cut – speculated as recently as 2-3 weeks ago – seems to be definitely out of the picture.
The key news from Australia, however, refers to politics. After some drama, Labor Party attracted 2 of 3 independent lawmakers, just enough to form the government and end the first hung Parliament uncertainty in the post-WW2 era. The Laborers are known for their support on the mining tax which is they issue for the markets at the moment.
The AUDUSD declined slightly after the news but it still remains in a quite steep upward channel. The first support is marked by a lower line of the channel (currently ca. 0,90) and the next one is at 0,8860. The resistance remains at 0,9235.
USDJPY – BoJ coldblooded
Bank of Japan didn’t change any parameters of monetary policy and indeed it couldn’t really do so. The Bank made a move last week extending its lending program but this failed to reverse a course of action on the USDJPY (which was believed to be a main target of the move). Acting again would be like using the last piece of ammo in desperation so it was nearly out of the table. The Japanese may hope that higher US market rates may do the job, but so far a correction on the US bond market didn’t help weaken the yen. There is still a chance for a retest of 83,55 and fresh multi-years lows.
EURUSD – 1,2920 holds, pair in consolidation
The Asian trade started with a heavy sell-off of the European currency. There were both: an excuse and a reason. Excuse was served yesterday by the German banking association claiming that the banking sector in Germany may need another 105 bln EUR of a fresh capital to meet new regulations. The reason was technical. The pair failed to move above a key resistance of a consolidation channel at 1,2920 so there was the only obvious direction. A support of 1,2588 remains crucial but the pair may also take advantage of weaker supports at 1,2730 or 1,2623. A sell-off had an impact on the EURCHF as well, sewing doubts about a possible reversal on the pair (we described two weekly hammer candles yesterday).
Events to watch – US comeback
The calendar for Tuesday is virtually empty. There is a release of German industrial orders for July (6.00 ET, 12.00 CET, +0,6% m/m) but even though German data is vital for judgment on the recovery in the zone, the focus is going to be elsewhere. US investors are back after a long weekend and they may have some thoughts after the previous week (full of key releases which so far didn’t confirm much feared deflation scenario).
