CENTRAL BANK news is dominating the currency markets this week and foreign exchange traders should be digesting these decisions as they are announced.
On Monday night, the Reserve Bank of Australia (RBA) shocked the markets by keeping interest rates on hold at 3.75 per cent. The expectation had been for a 25 basis point hike and the Aussie dollar correspondingly took a pounding yesterday.
Australian dollar-US dollar dropped one percentage point in a matter of minutes immediately following the decision, but the pair seems to have found some support around the US$0.8800 level. This support could prove a lucrative level to get long. Capital Spreads is quoting US$0.8800-$0.8803 for the pair.
Last week’s brief foray below ¥90 on US-dollar-Japanese yen may have proved to be unsustainable, but with the rebound quickly running out of energy too, confidence in the greenback is still proving hard to muster. As a result, traders should expect Friday’s non-farm payrolls to be under as much scrutiny as ever. Market expectations are now set for another positive figure, so any failure to deliver on this could easily exaggerate the downside on the pair. The current IG Index price on US dollar-yen is ¥90.65-¥90.68.
Euro-US dollar has been under pressure for some weeks now but strong US data has renewed a relief rally in risk appetite as well as raising expectations that a Fed rate hike might be sooner than previously expected. Until further bad news develops, the euro may continue to recover as risk appetite pushes shorts to unwind in the near-term. Spreadex is offering $1.3971-$1.3974 on the pair.