AUD/EUR FUNDAMENTAL OUTLOOK￼
AUD/EUR continued its rally in March, gaining an additional +1.5% for the month overall. The increase in the rate was in part due to the Eurozone’s extraordinary stimulus measures implemented last month. Also supporting the rate was uncertainty over Greece and asset flows favouring the Aussie over the Euro. Australian economic data was mostly in line with the consensus in March, with Building Approvals the highlight for the month, gaining +7.9% m/m versus an expected drop of -1.8%, however, Home Loans showed a decline of -3.5% compared to -1.9% anticipated. Employment Change in March was in line with expectations at 15.6K, while the Australian Unemployment Rate declined to 6.3% from 6.4%.
The RBA left its benchmark Cash Rate unchanged at 2.25% in March and at their latest meeting on April 7th. In the Statement on the Monetary Policy Decision, RBA Governor Glenn Stevens stated, “Commodity prices have declined over the past year, in some cases sharply. The price of oil in particular is much lower than it was a year ago. These trends appear to reflect a combination of lower growth in demand and, more importantly, significant increases in supply.”
The Eurozone posted mostly better than expected economic numbers in March, while the ECB left the Minimum Bid Rate at the historic low of 0.05%. Nevertheless, the single currency could be in for an even greater selloff if Greece misses a payment of €460M due on April 9th. ECB President Mario Draghi noted in a letter to Kostas Chrysogonos, Greek Member of the European Parliament, that, “The suspension of the Eurosystem’s minimum requirements for credit quality thresholds applicable to marketable debt instruments issued or fully guaranteed by the Hellenic Republic in the collateral framework, i.e. the so-called “waiver”, initially decided on by the ECB Governing Council on 6 May 2010, was an exceptional and temporary measure which was based on the positive assessment by the Governing Council of compliance with an EU/IMF programme.” The letter also said that “The ECB cannot engage in a restructuring of sovereign debt held by the Eurosystem as this would amount to monetary financing, which is prohibited by the Treaty on the Functioning of the European Union. “Traders will be watching for the Greek payment on the 9th, the ECB rate decision on the 15th, Australian Employment data on the 16th and the RBA Monetary Policy Meeting Minutes on the 21st for a better indication on the cross. Due to increased pressure on the Euro and the interest rate differential, the outlook on the cross continues to be positive in all time frames.
|ECONOMIC CALENDAR Major Releases|
|10th Australian Home Loans
14th Australian NAB Business Confidence,
15th ECB Minimum Bid Rate, Press Conference, Australian
Westpac Consumer Confidence,
16th Australian Emp. Change, Unemployment Rate, G20 Mtngs
17th Eurozone Final CPI, G20 Meetings
20th French and German Flash Manufacturing and Svcs PMIs
21st Aus. RBA Monetary Policy Meeting Minutes, German ZEW
Economic Sentiment, EZ ZEW Economic Sentiment
22nd Australian CPI, Trimmed Mean CPI
23rd German Ifo Business Climate, Spanish Unemp. Rate
29th German Preliminary CPI, EZ Private Loans
30th Aus. Import Prices, Eurozone CPI Flash Estimate, German
AUD/EUR TECHNICAL OUTLOOK
AUD/EUR has been rallying correctively since making twin lows at the 0.6520 level last December. Thus far, peaks have been seen at the 0.7159 level on January 22nd and at the 0.7283 level on March 8th. The cross has since entered into a down swing that has fallen as far as 0.6921.
Longer term, AUD/EUR rallied from 0.4713 in early 2009 to the 0.8616 level in mid-2012. It then formed a head and shoulders style top pattern and began correcting notably lower after its neckline broke to trade as low as the 0.6314 level in January of 2014. The cross then reacted steadily higher to top out at the 0.7244 level last September, before falling again to 0.6520 and forming an ascending wedge pattern. The latest upswing within this pattern has been a rally to 0.7283 in early March, before the cross then turned lower. The considerable overlaps noted in the cross’ recent price action seem more characteristic of a correction than a new impulse. Another relevant factor is the cross’ now- broken longer term down channel’s declining upper line which currently provides theoretical support at the 0.6342 level. In addition, AUD/EUR has recently been trading around the 38.2% Fibonacci retracement level of its preceding long term rally at 0.7125, with the 50% Fibo level situated below that at 0.6665 and the 24.6% Fibo level above it at 0.7695.
AUD/EUR broke above its key 200 day Moving Average in early March and just bounced from it again in early April. The gently rising indicator now reads at the 0.6936 level to yield a mildly bullish medium term outlook. Also, AUD/EUR’s 14-day RSI now reads at the 55.02 level in central neutral territory, which should not impede moves in either direction.
The medium term outlook for AUD/EUR has turned correctively bullish, with key near term resistance seen at the 0.7159 and 0.7283 levels.
|MAJOR LEVELS||Current level 0.7127|
Contact Te’a Truong at OzForex on +61 2 8667 8062 or email tea.truong [@] ozforex.com.au or REGISTER HERE