- EUR/AUD consolidating at a key 1.6250 area as markets get braced for a packed wek ahead.
- Draghi's last appearance left the euro open for downside pressure.
EUR/AUD is resting up at the confluence of the 21/50 day moving average, a critical support area, yet moves sideways in the grander scheme of the advance towards the 1.63 handle. Draghi influence has been dusted off and its back to geopolitics for a catalyst.
The single currency took the recent as expected Europan Central Bank and governor Draghi's last appearance in its stride while all policy instruments were kept unchanged. The ECB maintained the deposit rate at -0.50%, while leaving the refi rate at 0.00% while Draghi parried questions about future policy - of which, of course, in now down to Lagarde, a former finance minister of France and head of the International Monetary Fund, who will replace Mario Draghi at the helm of the ECB on Nov. 1.
Meanwhile, the Aussie is at the mercy of what goes down on the trade talks/deal/war front – a saga that keeps the proxy currency at bay. Analysts at TD Securities gave the load down of the current state of affairs:
Possible Outcomes in Case an "Interim Deal" is ReachedPostponing (or scrapping) the planned October 15 tariffs to December.Phasing-in the implementation of a new interim deal (agricultural purchases, dumping, etc).Leave the threat of December 15 tariffs (on the goods exempted from the September tranche) active as an enforcement mechanism. Further tariffs remain on the table.A positive communication tone to suggest the next round of trade negotiations will occur in the not too distant future.A currency agreement may be part of this discussion, but will likely be not formalized except as a verbal understanding.Phasing-out of the September tariffs would be a definite upside surprise, and bode well for a softening on the December tariffs.
FOMC to rock the apple cart
Meanwhile, the week ahead will be critical with both the Chinese PMIs and Federal Open Market Comiitee on the cards. "We expect the Fed to lower rates by 25bp again next week, delivering the third consecutive rate cut since July. The FOMC is likely to communicate patience in deciding future policy moves after next week's cut as they assess the impact of the three cuts they have already delivered. We look for the Fed to temporarily pause before resuming rate cuts in Q1 2020," the analysts at TD Securities explained.
EUR/AUD levels
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