AETOS Market Commentary

EUR/USD

EUR strengthened on Wednesday on the back of better-than-expected economic growth data coming out of China, this bolstered the risk appetite as other risk-on currencies rallied also. The data confirmed that China's economy grew at a steady 6.4 percent pace in the first quarter, defying expectations of a deep slowdown, as industrial production increased dramatically, and consumer demand showed signs of much needed improvement.

The overall sentiment has slightly improved and a good start a day prior to the release of closely watched economic data for the euro zone.

Investors are closely watching Chinese and European economic data for signals that global growth is recovering.

Today sees the release of Purchasing Managers Indexes for the manufacturing and service sectors in Europe and should provide the market with further clarification on the strength of the European economy. A strong number will mean investment inflows into Europe have been improving, which may give the EUR a slight boost against the greenback.

EUR/USD Daily Chart

The daily cloud base and 55-DMA was pierced again but the EUR cannot break resistance near 1.1325/30 levels. RSIs are biased up and consolidation persists so there are bull signs around. Look to buy on dips or wait for better signals once the resistance is breached.

 

AUD/USD

AUD is a currency that is sensitive to the economic developments in China being Australia's biggest trading partner, so the Australian dollar also jumped on the Chinese data however gave up the gains after.

The Aussie has been on a rollercoaster week so far as it weakened on Tuesday after the Reserve Bank of Australia said that a cut in interest rates would be "appropriate" should inflation stay low and unemployment trend higher. Many economists perceive this as the RBA purely discussing the possible economic scenarios of when a rate cut will appropriate and not an indication that a cut is near. Be mindful of the employment numbers due out today which are forecasted to be mixed.

Across the ditch, NZD fell after data showed that annual inflation slowed in the first quarter (0.1% vs. the expected 0.3%), which raised the chances of an interest rate cut in the coming months.

Other data on Wednesday showed that the U.S. trade deficit fell to an eight-month low in February as imports from China plunged, good signs for President Donald Trump's "America First" agenda however not so much for the USD.

AUD/USD Daily Chart

The 55 & 200-DMA gets pierced and a new short-term high is set but resistance near 0.7210 is still a fair bit away, we will need to see a push towards this for a strong conviction on a buy. Daily RSI diverges on the high and volumes may get thinner due to the Easter break. Signals are not as strong currently as fundamentals seem to be driving the pair.