The Australian dollar has been the star of the show today as retail sales data m/m beat expectations coming in at 0.4% (0.3% exp), showcasing that the Australian economy is indeed growing and better than expected. The Reserve Bank of Australia (RBA) will be keeping a close eye on market movements and is likely to be more hawkish given the data we’ve had recently. So expectations will be high for tomorrows rate rise talk and the wording that will be used by the RBA. Potentially we could see some talk of a rate rise, but the reality is that it’s likely sometime off given the commodity woes the Australian economy has had previously.
As a result the AUDUSD has been very strong on the charts and is likely to keep performing strongly against most major pairs. Resistance however has been very strong at 0.7661 and slowed down any further rises for the pair after today’s large jump. The next level can be found at 0.7751 and is likely to be a hard level to breakthrough given the 200 day moving average is around there as well, and technical bulls will be weary of such a level. Support levels can also be found at 0.7588 and 0.7527, but for now it looks like the bearish run may have been broken and the bulls are back in control. All in all, the focus will be on the RBA meeting tomorrow so I would expect some large movements from the AUDUSD and these levels will be key for traders.
One of other key movers today has been the Euro, and the Italy effect. The current new government is looking to pass a number of new measures to help stimulate the economy, one of them being a flat tax for corporations which will put pressure on its fiscal position and other potential changes for families. These are likely to get the bears stirred back up in the market as traders are keen to take advantage of the changes and in fighting from the Euro-zone. Certainly this is a new time for Italy, but changes in politics is nothing new there. The real test will be how the economy performs with these measures and so far markets are not impressed at all.
The EURUSD on the charts so far has been boosted by weaker US data which came out a short time ago and the bullish movements we saw previously were weaker off the back of the data. Looking at the chart it’s clear to see that resistance at 1.1719 and the 20 day moving average are likely to stop bullish movements. If we saw a bullish extension movement then 1.1824 is likely to be the focus for traders. Bearish movements are likely to find support at 1.1622 and 1.1535 in the long run. For now the Bears have paused, but with Italy throwing curveballs the Euro is likely to take a hit in the short to medium term.