FOREX TRADING

Risk aversion crept back into markets today, putting pressure on global bourses. Ongoing concerns regarding European sovereign debt and policy tightening in China weighed on risk appetite, boosting demand for safe haven assets like the greenback and the yen. The RBA increased Australia’s benchmark rate for the 6th time since October but hinted to a slow in the pace of monetary tightening, sparking a sell-off in the aussie. The greenback benefitted with the dollar index re-testing the April 28th high, at 82.71. Commodity prices were softer on dollar strength, with gold dipping to $1181 and crude oil falling back below $86 per-barrel.

Bail-Out Provides No Support

Euro pressure persisted amid lingering fears over Greece, as today marked the start of a 48 hour nationwide public sector strike in protest to the recent implementation of strict austerity measures. The single currency fell early in the London session, triggering our medium-term limit at 1.3130. The euro’s next target lies at the figure. Subsequent floors are eyed at the 100% Fibonacci extension taken from the April 26th and May 2nd highs at 1.3060, followed by 1.3020 and the 1.30 handle. Long-term targets extend as low as 1.2880. To the topside, resistance is seen at 1.32, backed by our risk limit at 1.3260, and the 1.33 figure. Upside potential gains momentum with a break above the monthly pivot at 1.3340, with additional ceilings eyed at 1.34 and 1.3450.

RBA Raises Rates

The aussie fell today after the RBA raised Australia’s key interest rate by 25 basis points to 4.5%. Although the move was widely anticipated, remarks made by RBA governor Glenn Stevens were less hawkish, noting that the recent ‘significant adjustment’ in rates had now normalized rates to ‘be around average.’ The statement suggests the central bank will keep rates on hold after the third consecutive month of monetary tightening. The aussie tumbled on the news, falling to its lowest level in nearly one week. Demand is eyed at the 100% Fibonacci extension taken from the Dec 23rd and Feb 5th troughs, at .9170, with additional support levels seen at .9130 followed by the figure and .9060. Resistance starts at .9280, backed by the .93 handle and .9320. Upward momentum gains strength with a breach above the R1 monthly pivot at .9390, leaving targets at .9450 and .9480.

Today’s calendar sees US factory orders and pending home sales at 10am in New York, with both seen lower m/m. Tomorrow, Germany, the Eurozone, and the UK are expected to show no improvements in PMI figures. The Nikkei was closed today in observance of Greenery Day. European markets are lower across the board, with US equity futures also pointing to a weaker open, mid-day in London.