The Japanese yen, Swiss franc, and US dollar all began this week’s forex trading on a high note as the safe haven currencies rallied following disappointing US ISM manufacturing numbers. The Australian dollar was a down sharply in early trading today on a combination of the “risk-off” environment and a signal of caution by the RBA to raise rates given international influences.
Key Economic Events:
AUD – Cash Rate and Rate Statement – 04:30 GMT
Actual: 4.50%. Expectations: 4.50%. Previous: 4.5%.
As expected the RBA held interest rates steady but the Australian central bank signaled it would likely keep rates on hold given the headwinds in global economy. The Aussie slid across the board as traders likely expected a more hawkish statement. Support for the AUD/USD is found at 1.0890 and 1.0800. These levels may offer traders better entries into the uptrend as the RBA will likely continue to increase Australian interest rates given the elevated rates of inflation and excessive growth in the Australian economy.
GBP – Construction PMI – 08:30 GMT
Expectations: 53.2. Previous: 53.6.
Yesterday’s dreadful manufacturing PMI numbers were below the 50 boom/bust level and increase the chances of additional quantitative easing by the BOE. Support is seen at 1.6260. Fibonacci retracement targets from the July low come in at 1.6220 and 1.6125.
USD – US Debt Ceiling Vote – TBA
Yesterday the House approved a $2.4 trillion increase to the US debt ceiling and today the bill awaits a vote in the Senate. While the deal isn’t perfect by any standards and leaves the heated debate over bloated entitlement programs for a later date expectations are for the bill to be approved today. In his weekly column in the New York Times, Nobel prize winning economist Paul Krugman points out the budget cuts will only further weigh on US economic growth with a reduction in government spending in a time where the US economy needs all the stimulus it can get. EUR/USD bias is to the downside as the pair has not been able to hold a bid above 1.45. Support is found at 1.4140 with a 61.8% retracement target at 1.4100 from the July low to the July 27th high. Resistance is located at the overnight high of 1.4280 and 1.4450.
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