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Asian Session: RBA Shifts Tone

Tue, Aug 4 2009, 08:30 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets  |  View company's profile

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Market Brief

The Dollar dropped heavily after manufacturing data from Europe and UK posted better than expected readings. The German PMI rose to 45.7 against expectations of 45.2 and the UK PMI figure rose to 50.8 against expectations of 47.7. The US ISM Manufacturing Index rose to 48.9 against expectations of 46.2 which was the highest in 11 months. The Dow Jones Index extended its rally boosted by positive share movements from Bank of America, Wells Fargo and Citigroup as HSBC posted unexpected profits of $3.35 Billion. Also helping the rally was the fact that the S&P 500 crossed the 1000 mark for the first time since November 2008 boosted by the manufacturing data which further strengthened the case of recovery from the recession.

The Dollar continued its drop against the Euro and the Pound on positive economic data boosting the Euro to a high of 1.4445 and the Pound to a high of 1.6988. Both the pairs broke strong resistance levels continuing their climb as stronger manufacturing data aided by risk appetite boosted their rallies. Retail sales in Germany dropped unexpectedly 1.8% for June which had earlier brought the Euro down to 1.4207 levels but later climbed backed by the PMI data. The Yen was also weak along with the Dollar as investors shifted to riskier currencies. The equity markets are entering the overbought territory with the S&P 500 crossing the psychological 1000 level and the Dow Index moving higher above 9200. A correction is due in the short term in the equity indices as well as the currencies as investors are waiting for the central bank rate decisions ( BoE, ECB) as well as the all important US Non-Farm Payroll data due out on Friday where a higher drop could lead to increased risk aversion and USD strength against the currencies along with drops in the equity markets. In Australia, the RBA held rates steady at 3.00% as expected but shifted bias from an easing to a neutral tone. The RBA removed "the outlook for inflation allows some scope for further easing of monetary policy," from the accompanying statement.

Today the important news would be the Personal Income and Spending readings from the US where the Income data is expected to decline by 1% (the most since 2005) and the spending levels to rise for the second straight month by 0.3% although with consumers saving more, a drop in data cannot be ruled out which could bring in a wave of risk aversion.

Currency Tech

AUDUSD
R 2: 0.8695
R 1: 0.8520
CURRENT: 0.8407
S 1: 0.8340
S 2: 0.8239

EURJPY
R 2: 139.22
R 1: 138.30
CURRENT: 136.62
S 1: 134.30
S 2: 132.80

USDCAD
R 2: 1.1012
R 1: 1.0935
CURRENT: 1.0704
S 1: 1.0547
S 2: 1.0440

USDMXN
R 2: 13.415
R 1: 13.305
CURRENT: 13.1227
S 1: 13.060
S 2: 12.987

• S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

Published on  Tue, Aug 4 2009, 08:42 GMT

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