AUD/USD: CPI May Be A Threat To Our Long Position
Growth Aces | Apr 21, 2015 06:27AM ET
GROWTHACES.COM Forex Trading Strategies
Taken Positions
EUR/USD: long at 1.0740, target 1.1000, stop-loss 1.0615
GBP/USD: long at 1.4900, target 1.5270, stop-loss 1.4820
USD/JPY: short at 119.35, target 117.20, stop-loss 120.20
USD/CHF: short at 0.9590, target 0.9360, stop-loss 0.9685
USD/CAD: short at 1.2280, target 1.2000, stop-loss 1.2380
AUD/USD: long at 0.7730, target 0.7950, stop-loss 0.7620
EUR/GBP: long at 0.7170, target 0.7350, stop-loss 0.7110
GBP/JPY: long at 177.20, target 179.50, stop-loss 176.20
AUD/JPY: long at 91.80, target 94.00, stop-loss 90.80
Pending Orders
NZD/USD: buy at 0.7630, if filled - target 0.7850, stop-loss 0.7520
EUR/JPY: buy at 127.40, if filled - target 130.00, stop-loss 126.30
CHF/JPY: buy at 123.75, if filled - target 126.20, stop-loss 122.60
EUR/USD Falls On Greek Worries
(long at 1.0740)
- The EUR is weaker across the board today, pressured by deepening worries that Greece could default on its debt and eventually exit the currency union. Greece ordered state entities to park idle cash at the central bank in a scramble on Monday to pay its bills. Monday's legislative order includes local administration but excludes pension funds and some state-owned firms. Cash reserves that are needed by these bodies for their immediate payment needs are also excluded from the regulation.
- Raising pressure on the government, local officials threatened to defy the decision, which needs parliamentary approval. Most opposition parties said the decision was arbitrary.
- Greek Prime Minister Alexis Tsipras needs to present detailed plans to reform the economy before a meeting of euro zone finance ministers in Riga on April 24 to prevent a default which could trigger a Grexit. The next regular Eurogroup meeting is on May 11, just a day before the IMF requires a EUR 750 million loan repayment.
- ECB Vice President Vitor Constancio said: “We are convinced at the European Central Bank that there will be no Greek exit. The Treaty does not foresee that a country can be formally, legally expelled from the euro. We think it should not happen.”
- The ZEW economic sentiment index fell to 53.3 points from 54.8 in March, undershooting consensus forecast of 55.3 points. But the big surprise came in the current conditions index which at 70.2 is stronger than the 56.0 that was expected and comes after 55.1 in March. This is the highest reading for the current conditions index since July 2011 and likely reflects optimism of investors over the start of ECB’s quantitative easing as well as record levels on the DAX.
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- We have seen the EUR slip back after last week’s peak at 1.0850. However, the reaction to Greek problems is limited, which suggests that investors are do not want to buy USD after the recent string of weak U.S. economic data. If the EUR/USD closed above 1.0700 today a move back towards the highs last week is still possible in the coming days with the potential for a rise towards our target of 1.1000.
Significant technical analysis' levels:
Resistance: 1.0789 (21-dma), 1.0824 (high Apr 20), 1.0848 (high Apr 17)
Support: 1.0624 (low Apr 16), 1.0571 (low Apr 15), 1.0532 (low Apr 14)
AUD/USD Fell Sharply After Stevens’ Comments And RBA Minutes. Eyes On CPI.
(long at 0.7730)
- Reserve Bank of Australia Governor Glenn Stevens said Australia's central bank was willing to cut interest rates again if needed, but is cautious about the likely impact on house prices and debt levels. Stevens said that rate cuts were still effective and that the central bank had not reached a position where lowering rates was completely useless. In his opinion the AUD is very likely to fall further over time.
- In minutes of the April 7 policy meeting, the Reserve Bank of Australia also said it expected the AUD to fall further given recent declines in key commodity prices. The minutes said: “Members also saw advantages in receiving more data, including on inflation, to assess whether or not the economy was on the previously forecast path and allowing more time for the economy to respond to the reduction in the cash rate earlier in the year.” Key inflation figures for the first quarter are due on Wednesday and are expected to show no price pressures.
- The RBA cut interest rates to a record low of 2.25% in February, but the central bank surprised many analysts by skipping further moves at its policy meetings in March and April. The next RBA meeting is scheduled for May 5 and financial markets expect a rate cut. Futures markets imply around a 50% chance of a quarter-point easing in May, rising to nearly 90% in June. In our opinion the RBA may surprise the market and keep rates on hold which will support the AUD.
- There were no major changes in the RBA language but the AUD/USD fell significantly after Stevens’ comments. Moreover, investors expect soft CPI figures on Wednesday (1:30 GMT) adding to pressure on the AUD.
- We got long on AUD/USD at 0.7730 and AUD/JPY at 91.80. The longs could be in trouble in case of weaker CPI reading. The nearest support levels is 0.7673, daily low on April 16.
Significant technical analysis' levels:
Resistance: 0.7736 (55-dma), 0.7798 (hourly high Apr 20), 0.7844 (high Apr 20)
Support: 0.7673 (low Apr 16), 0.7600 (psychological level), 0.7573 (low Apr 15)
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