Aussie Surges after RBA, Dollar and Euro Soft
Australian Dollar rises broadly after a hawkish twist in RBA statement, which hints at earlier rate hike. New Zealand Dollar is following closely as second strongest for now. On the other hand, Dollar and Euro are under some selling pressure. Yen and Swiss Franc are mixed, awaiting more guidance from overall risk sentiment.
Technically, focus will remain on Euro as the selling has somewhat picked up. We’d reiterate that break of 1.0943 support in EUR/USD, and 0.8394 support in EUR/GBP will indicate completion of near term rebound. The development will also revive bearishness for resuming larger down trend through 1.0805 and 0.8201 at a later stage. We’ll see.
In Asia, Nikkei closed up 0.19%. Hong Kong HSI is up 2.10%. China Shanghai is still on holiday. Singapore Strait Times is up 0.45%. Japan 10-year JGB yield is up 0.0039 at 0.220. Overnight, DOW rose 0.30%. S&P 500 rose 0.81%. NASDAQ rose 1.90%. 10-year yield rose 0.035 to 2.412.
RBA stands pat, drop the patient stance
RBA keeps cash rate unchanged at 0.10% today as widely expected. The central bank dropped the line that “the Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve.” It’s seen as a sign that RBA is preparing the markets for an earlier rate hike.
In the forward guidance, RBA said “the Board has wanted to see actual evidence that inflation is sustainably within the 2 to 3 per cent target range before it increases interest rates.”. While inflation has picked up and further increase is expected, “growth in labour costs has been below rates that are likely to be consistent with inflation being sustainably at target.”
RBA concluded, “over coming months, important additional evidence will be available to the Board on both inflation and the evolution of labour costs. The Board will assess this and other incoming information as its sets policy to support full employment in Australia and inflation outcomes consistent with the target.”
AUD/CAD upside breakout after RBA, pressing 0.95
Australian Dollar rises sharply after the hawkish twist in RBA statement. AUD/CAD’s strong break of 0.9460 resistance confirms resumption of whole rise from 0.8906. Near term outlook will now stay bullish as long as 0.9337 support holds. Sustained break of 61.8% projection of 0.8906 to 0.9460 from 0.9160 at 0.9511 will indicate further upside acceleration. Next target will be 100% projection at 0.9723.
More importantly, the current development affirms the case that medium term corrective fall from 0.9991 has completed at 0.8906. AUD/CAD could be ready to resume the whole up trend from 0.8058 (2020 low).
BoJ Kuroda: Recent Yen moves somewhat rapid
BoJ Governor Haruhiko Kuroda told the parliament today that recent moves in Yen exchange way have been “somewhat rapid”. He added, “it’s extremely important for currency rates to move stably reflecting economic and financial fundamentals.”
“We will patiently maintain powerful monetary easing to support an economy still in the midst of recovering from the COVID-19 pandemic’s impact,” he reiterated.
“If long-term interest rates rise rapidly, we are ready to deploy such market operations,” Kuroda said, referring to the intervention to cap 10-year JGB yield at 0.25%.
On the data front
Australia AiG performance of construction rose from 53.4 to 56.5 in March. japan labor cash earnings rose 1.2% yoy in February, above expectation of 0.6% yoy. Japan house hold spending rose 1.1% yoy in February versus expectation of 2.7% yoy. France industrial output dropped -0.90% mom in February, versus expectation of -0.50% mom.
Looking ahead, Eurozone and UK PMI services final will be released in European session. Canada will release trade balance. US will release trade balance and ISM services.
AUD/USD Daily Report
Daily Pivots: (S1) 0.7499; (P) 0.7528; (R1) 0.7573; More…
AUD/USD’s rally from 0.6966 resumed by breaking through 0.7539 resistance, and hits as high as 0.7629 so far. Intraday bias is back on the upside. As noted before, the strong break of 0.7555 structural resistance should confirm that whole corrective decline from 0.8006 has completed at 0.6966. Further rise should be seen back to retest 0.8005 high. In any case, near term outlook will now remain bullish as long as 0.7455 support holds.
In the bigger picture, correction from 0.8006 could have completed at 0.6966, after drawing support from 0.6991. That is, up trend from 0.5506 (2020 low) might be ready to resume. Firm break of 0.8006 will target 61.8% projection of 0.5506 to 0.8006 from 0.6966 at 0.8511 next. This will remain the favored case as long as 0.7164 support holds.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 22:30 | AUD | AiG Performance of Construction Index Mar | 56.5 | 53.4 | ||
| 23:30 | JPY | Labor Cash Earnings Y/Y Feb | 1.20% | 0.60% | 0.90% | 1.10% |
| 23:30 | JPY | Overall Household Spending Y/Y Feb | 1.10% | 2.70% | 6.90% | |
| 04:30 | AUD | RBA Interest Rate Decision | 0.10% | 0.10% | 0.10% | |
| 06:45 | EUR | France Industrial Output M/M Feb | -0.90% | -0.50% | 1.60% | 1.80% |
| 07:45 | EUR | Italy Services PMI Mar | 51.5 | 52.8 | ||
| 07:50 | EUR | France Services PMI Mar F | 57.4 | 57.4 | ||
| 07:55 | EUR | Germany Services PMI Mar F | 55 | 55 | ||
| 08:00 | EUR | Eurozone Services PMI Mar F | 54.8 | 54.8 | ||
| 08:30 | GBP | Services PMI Mar F | 61 | 61 | ||
| 12:30 | CAD | Trade Balance (CAD) Feb | 2.6B | |||
| 12:30 | USD | Trade Balance (USD) Feb | -88.5B | -89.7B | ||
| 13:45 | USD | Services PMI Mar F | 58.9 | 58.9 | ||
| 14:00 | USD | ISM Services PMI Mar | 57.7 | 56.5 |