Forex Afternoon Wrap – 11/05

Key Notes:

• Australia NAB business confidence 3 vs. 3 previously
• Eurogroup meetings
• BoE Bank rate, interest rates unchanged at 0.5%

Later:

• US Labor market conditions index

China cuts interest rates over the weekend

The currency markets started a fresh week with news from China. The PBoC cut its benchmark interest rates by 25bps to 5.1%, the third since November last year while also lowering its deposit rates to 2.25%. The markets opened today but there was little to no effect, especially on the Aussie and the Kiwi dollars which are known to be susceptible to economic news and policy decisions from China. The Australian Dollar continued to trade within a range in the short term, while the Kiwi remained weak, trading near 0.737 levels amidst renewed speculation of an RBNZ rate cut in June or July meetings.

USDJPY was seen trading modestly higher near 120 levels, but needs to see a close above this level to aim for 120.28 followed by 120.78 in the near term. However, the Dollar remains well supported against the Yen in the short term, as long as prices manage to hold above 119.65 levels.

The European session was relatively quiet with Greece talks shooting to the limelight amidst a quiet trading session. The Euro was seen trading weaker earlier in the day during the Asian session and the selling pressure kept the Euro subdued across the board. EURUSD broke below the 1.117 handle and looks poised to test lower towards 1.10 which remains an untested support level. Against its peers, the Euro came under selling pressure as the Eurogroup finance ministers meet day. The Euro is likely to remain under pressure and could see some volatile moves with Greece being the only main theme for the day from Europe.

From the UK, the Bank of England left its interest rates unchanged at 0.5% in a widely expected move. However, the British Pound continued to hold its ground across the board. GBPUSD was seen trading higher near 1.55 levels after finding short term support at the daily pivot level of 1.5407. The currency is trading just a few pips below the major resistance level of 1.553 – 1.550 levels. A break higher could see GBPUSD eye fresh highs for the year or month.

EURGBP was however one of the currency pairs that saw a sharp move today, trading below the 0.72 handle as the Euro’s selling pressure, combined with the bullish bias on the British Pound has continued to keep the EURGBP subdued in recent days, since the election results were announced.

The US Dollar Index managed to hold steady, trading above 95 and looks poised to post a third day of gains since last Thursday. However, resistance comes in at 95.5 and a break above this level is needed for the Greenback to eye 96.33 levels.

Economic data from the US is quiet today with the Labor Market Conditions Index due to be released later in the evening. However, this data is unlikely to see any sharp changes in the sentiment as the US Dollar continues to trade mixed across the board.