New dovish comments on the Australian landscape

Jun 10, 6:51 am
Market news

Several rumours, later denied, put pressure on the American dollar as the president Barack Obama was thought to have complained about the appreciation of the American currency. Even if the rumour was disproved, markets started to think about the influence of the currency on the economy and considered the response of the Federal Reserve: although apparently is not the main concern, the strengthened currency is limiting the inflation and requires a longer period of keeping the current levels. Between the American dollar and the Euro, the latest remains stronger also taking into account the fact that in the short-term, the trend appears to be weak.

The Australian dollar stays calm for the time being, considering the dovish comments of Reserve Bank of Australia Governor Glenn Stevens which, frustrated with the limits of monetary policy, emphasised that more infrastructure spending could be a driver of growth and confidence (more fiscal work). It looks like a series of weak data could seriously alert the markets about a new interest rate cut and the Aussie could face new waves of depreciation which inevitably will affect the New Zealand neighbour.

Concerning the New Zealand dollar, on Thursday, the Official Cash Rate will be announced. Even if changes are not forecasted, it would not be a surprise to meet dovish comments in both the Rate Statement and the press conference. In consequences, the New Zealand dollar may experience pressure, thus the NZDUSD may lay down on the 0.7000 support level.

The Canadian dollar is causing a significant correction, especially for USDCAD, but also for its other peers. Data published yesterday contributed to the building of a positive tendency which started last week on Friday. Together with the rising oil quotations and the dizzy American dollar, the Canadian currency is free to go to new local highs. The USDCAD quotation broke the 1.2375 support level, while the next barrier to overcome in the new descending tendency towards 1.2240 may be the 1.2296 support level.

The oil quotations strengthen in the last days as traders had early reactions to the today’s Crude Oil Inventories report, but also as the prospects of the demand improved as the decreasing inflation in China is suggesting that the economy is stalling and needs more easing which would encourage people to consume. The Brent quotation broke an important resistance level (65.70) and may be heading towards 66.85 and 67 dollars per barrel. The WTI price needs to pass through the 61 dollar level in order to get to the local maximum of 62.55.

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