16 December, 2013
The Aussie dollar continued its dramatic decline last week, as the RBA governor Glenn Stevens took further action against the AUD, after commenting that he believed the current fair value of the AUD should be 0.85 cents to the USD. This, in turn, sent the dollar dropping rapidly despite upbeat unemployment figures which showed a boost in the month of November.
The week ahead looks likely to impact the dollar heavily, as the RBA meeting minutes are due out. Traders will be looking closely at this report as the threat of a rate cut by the RBA is on the cards and could lead to more dramatic drops for the Australian dollar. Overall though, more significant drops could certainly be in play for the AUD before the year is out, giving room for the RBA and the Australian economy as it looks to have an export-led recovery.
Current resistance levels can be found at 0.9033, 0.9136 and 0.9206; with major resistance found at 0.9033 as the AUD looks likely to sink further. Support levels can be found at 0.8925, 0.8869 and 0.8800 with 0.8800 likely to be the hard floor to crack in order for any further movements south on the charts. The RSI still has room to move lower and certainly, traders will look to push on support levels.
The Euro managed to push its way higher last week before pulling back from recent monthly highs as traders were worried that it had overextended in the current market. Despite comments from the ECB which painted a fairly neutral picture over the rise of the currency, this was in conjunction to the recent speech two weeks earlier which the ECB warned against higher currency prices as a risk to the Euro-zone.
Markets are poised for this week's inflation data, as the CPI data will help markets determine the state of deflation in the Euro-zone which is currently a real risk, as policy makers look to act to prevent another Japan. Overall though, German data is due out throughout the week and this will likely have a big effect in the run up to Christmas.
Current technical movements show that resistance can be found at 1.3785 and 1.3830; with major resistance at 1.3830 with markets looking to break through if given the signal by the ECB. Support levels can be found at 1.3689, 1.3648 and 1.3590. These look unlikely to be tested unless the current bullish trend line is broken and a breakout occurs – RSI movements suggest that buying pressure is still there and that it's unlikely.
The Pound started to range after last week’s light economic data output. However, sentiment remained overall positive for the Pound versus its major partners. The week as a whole though saw a breakthrough of the current bullish trend line and the pound looked to range again as it searches for direction.
The markets are now awaiting the crucial end of year data on CPI which showcases the so far stellar performance of the Pound. Overall though, it’s likely that markets will react positively to a decrease in inflation, and the prospect of rates being increased in the near term.
Current market technicals show resistance at 1.6440 and 1.6511; with major resistance at 1.6440 as the Pound looked to push through before falling back last week. Support levels can be found at 1.6256, 1.6152 and 1.6055; with major support found at 1.6256. Overall though, the RSI shows strong buying pressure for the Pound, and it’s likely there will be no dramatic falls in the short-medium term.
The New Zealand Dollar showed massive economic confidence last week, as data released showed that markets remain positive with business confidence up, and the RBNZ talking up the current state of the economy and its primary sectors. However, this was all overshadowed by the heavy drops of the Australian dollar which weighed on the Kiwi leading to the high flying Kiwi starting to range.
Traders in the coming week will be focused on GDP forecasts for New Zealand in the coming weeks – these are expected to massive growth in the economy, Trade Balance data is also expected to be positive. However, Aussie data will likely weigh on the currency.
Market technicals are relatively unchanged compared to last week and that resistance can be found at 0.8369 and 0.8479; with major resistance at 0.8369 where the market has tested the level twice in the last month. Current support levels can be found at 0.8211, 0.8151 and 0.8067. Overall though, current market sentiment is bullish, however, with a weak AUD weighing on the Kiwi, it is likely we could see more consolidation and ranging in the short term.
The Yen fell further over the last week as markets looked to push it lower, amid fears of a weaker Japan as business investment is down and as the US dollar looks to get even stronger on a string of positive economic data that was released last week.
The week ahead looks likely to centre around the end as the BoJ is set to have its monthly Interest Rate Statement followed by its Monetary Policy Statement, which traders will pay close attention to as a window of what might happen in 2014 as the BoJ is expected to get more aggressive if need be.
Looking at market technicals, we can see that current resistance is at 103.180, 103.575, and 103.920; with 103.575 the current major level of resistance which is likely to be tested again in the near future. Current support levels can be found at 102.425,101.747 and 101.239. The RSI shows heavy buying pressure for the USD however, the Yen is likely to show low volatility unless we see strong US economic data putting pressure on the pair and forcing it lower.
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