The Reserve Bank of Australia lowered interest rates to 2.75% last night. Below is a chart of AUDUSD (that resulted in my trades being stopped out  ). However, personally, I still like AUD for the following reasons: 1. Relatively low debt to GDP 2. Trade surplus 3. Even with the rate cut, it still has the highest interest rate of any G8 economy Three negatives that many are citing: 1. Australia is largely dependent upon China; if you believe China is due for a hard crash, Australia will likely crash as well. With a high externaldebt/GDP, this may lead to capital fleeing – doubly so if interest rates fall to help stimulate the economy. Personally, I’m not as convinced as manyothers that China is due for a hard crash. 2. Australia does have one of the highest measures of external debt to GDP in the world. External debt factors in all public and private debt held bycreditors outside of the country. 3. Australia continues to run a budget deficit, and while its budget is smaller than many other countries – about 3% of GDP – there are concernsthe deficit will run for years. You can find more about Australia’s economy here on Trading Economics. Personally, I’m still somewhat bullish on AUD, because it’s all relative: I think most economies are in trouble, and I still like AUD more than prettymuch every major currency except CAD. If Australia lowers rates again and/or shifts to a trade deficit, I will likely change my opinion. Simit Patel is the founder of InformedTrades, an online community featuring free courses and product reviews. See our free course from Top Dog Trading as well as our INO TV review. 

RBA rate cut: The Reserve Bank of Australia cut its official cash rate from 3.0% to a record low of 2.75%. Although the market has priced in a more dovish RBA, a rate cut at this meeting was a bit of a surprise, and the bank also left room for further rate cut as well. The AUD was pressured and the AUD/USD fell below a support since April to challenge a key support area since July 2012…

If we did not have the Aussies, the RBA, or Governor Glenn Stevens, this would have been another bland and boring market to be talking about. Policy makers down-under certainly know how to surprise it seems, as very few analysts had predicted any movement by the Central Bank in their latest rate decision. The Governor has managed to keep markets on their toes by cutting overnight interest rates to a record low of +2.75% earlier this morning.
The ‘street’ in general…

Key Fundamental Forex Events and Forecasts for the Coming Week

The following table lists the key economic data and other events that are due out during the week of May 6th – May 10th, with release times displayed for the GMT time zone.

The list also includes the current market consensus forecast for each event and indicates what sort of deviation might affect the forex market valuation of the indicated currency positively.

Monday, May 6th

• All Day JPY Bank Holiday
• 2:30am AUD Retail Sales (0.2% expected, > good for currency.)
• All Day GBP Bank Holiday
• 1:30pm CAD Building Permits (0.7% expected, > good for currency.)
• 2:00pm EUR ECB President Draghi Speaks (hawkish = good for currency.)
• 3:00pm CAD Ivey PMI (58.3 expected, > good for currency.)

Tuesday, May 7th

• 2:30am AUD Trade Balance (0.20B expected, > good for currency.)
• 5:30am AUD Cash Rate Decision (unchanged at 3.00% expected, > good for currency.)
• AUD RBA Rate Statement (hawkish = good for currency.)
• 8:00am CHF Foreign Currency Reserves (last 438.3B expected, > good for currency.)
• 10:00pm NZD RBNZ Financial Stability Report (hawkish = good for currency.)

Wednesday, May 8th

• Tentative CNY Trade Balance (15.5B expected, > good for currency.)
• All Day EUR French Bank Holiday
• 8:15am CHF CPI (0.1% expected, > good for currency.)
• 11:45pm NZD Employment Change (1.1% expected, > good for currency.)
• NZD Unemployment Rate (6.8% expected, < good for currency.)

Thursday, May 9th

• 2:30am AUD Employment Change (11.5K expected, > good for currency.)
• 2:30am AUD Unemployment Rate (5.6% expected, < good for currency.)
• 2:30am CNY CPI (2.3% expected, > good for currency.)
• All Day CHF Bank Holiday
• All Day EUR French Bank Holiday
• All Day EUR German Bank Holiday
• 9:30am GBP Manufacturing Production (0.4% expected, > good for currency.)
• Tentative EUR Spanish 10-Year Bond Auction (last average yield 4.61 percent, with a 2.6 bid to cover ratio expected, < yield and > ratio good for currency.)
• 12:00pm GBP Asset Purchase Facility (375B expected, > good for currency.)
• 12:00pm GBP Official Bank Rate (unchanged at 0.50% expected, > good for currency.)
• 12:00pm Tentative GBP MPC Rate Statement (hawkish = good for currency.)
• 1:30pm USD Weekly Initial Jobless Claims (333K expected, < good for currency.)

Friday, May 10th

• 12:50am JPY Current Account (0.48T expected, > good for currency.)
• 2:30am AUD RBA Monetary Policy Statement (hawkish = good for currency.)
• Day 1 ALL G7 Meetings (hawkish = good for currency.)
• 1:30pm CAD Employment Change (13.5K expected, > good for currency.)
• 1:30pm CAD Unemployment Rate (7.2% expected, < good for currency.)
• 2:30pm USD Fed Chairman Bernanke Speaks (hawkish = good for currency.)

Saturday, May 11th

• Day 2 ALL G7 Meetings (hawkish = good for currency.)

Technical Forecast and Levels to Watch for the Majors This Week

EURUSD: Lower

Resistance:

Initial: 1.3126/61, 1.3199/1.3201, 1.3224, 1.3242/99, 1.3305/08, 1.3318/21, 1.3353, 1.3376/85, 1.3398/1.3403, 1.3433/34 and 1.3478/95.

Above: 1.3519, 1.3544/46, 1.3568, 1.3597, 1.3614, 1.3710, 1.3795/98, 1.3836, 1.3969, 1.4000, 1.4246, 1.4500/17, 1.4695 and 1.4939.

Support:

Initial: 1.3106, 1.3093, 1.3047, 1.3031/39, 1.3018/22, 1.3009/10, 1.3000, 1.2990, 1.2946/66, 1.2904/19, 1.2801/79, 1.2799, 1.2744/54, 1.2623/92, 1.2588/89, 1.2501/19, 1.2407/96, 1.2381/91, 1.2323/33 and 1.2241/55.

Below: 1.2162, 1.2143, 1.2133, 1.2041 and 1.1938.

USDJPY: Mildly Higher

Resistance:

Initial: 99.26, 99.50, 99.60/68, 99.75 and 99.83/94.

Above: 100.00, 101.43, 108.42 and 110.47.

Support:

Initial: 98.87, 98.48, 98.08, 97.79/83, 97.55, 97.00, 96.65/70, 96.55, 96.05, 95.79, 95.44, 94.90/95.07, 94.55, 94.05/19, 93.76, 93.68, 93.50, 93.17, 92.77/95, 92.14/30, 91.19, 90.85, 90.20/32, 89.40/66, 88.05, 87.95/99 and 87.79.

Below: 87.11/13, 86.63, 85.92, 85.51, 84.09/80, 83.85/96, 83.01, 82.53/82.83 and 82.01/22.

GBPUSD: Lower

Resistance:

Initial: 1.5568, 1.5601/06, 1.5624/50, 1.5673, 1.5685/92, 1.5714, 1.5781, 1.5803/07, 1.5825, 1.5844, 1.5874/77 and 1.5886/90.

Above: 1.5900/27, 1.5961, 1.5975/91, 1.6001/08, 1.6051/66, 1.6077, 1.6083/96, 1.6109/16, 1.6130/51, 1.6151/54 and 1.6177/98.

Support:

Initial: 1.5545, 1.5514/16, 1.5498/99, 1.5479, 1.5458, 1.5418, 1.5410, 1.5403, 1.5375/92, 1.5362, 1.5334, 1.5260/93, 1.5208/23, 1.5198, 1.5175/87, 1.5152, 1.5130, 1.5123, 1.5092, 1.5081, 1.5072, 1.5026/32, 1.4985, 1.4966/67, 1.4884, 1.4872, 1.4830 and 1.4785.

Below: 1.4345 and 1.4232.

AUDUSD: Mildly Higher

Resistance:

Initial: 1.0300/03, 1.0319/47, 1.0357, 1.0384/85, 1.0392/96, 1.0354/74, 1.0402/40, 1.0457/98, 1.0508/28, 1.0561/66, 1.0572/84, 1.0596/1.0638, 1.0654, 1.0668/86, 1.0751/53, 1.0792/98 and 1.0842/54.

Above: 1.1010, 1.1064 and 1.1079.

Support:

Initial: 1.0280/92, 1.0255/66, 1.0220/26, 1.0201, 1.0181/82, 1.0165/77, 1.0148/51, 1.0114/17, 1.0099/1.0100 and 1.0052.

Below: 1.0000/18, 0.9925/83, 0.9900, 0.9849/96, 0.9794, 0.9732, 0.9620/89, 0.9585, 0.9536/41, 0.9500 and 0.9486.

USDCAD: Mildly Lower

Resistance:

Initial: 1.0082/99, 1.0103/05, 1.0128/42, 1.0156, 1.0172, 1.0178/82, 1.0199/1.0226, 1.0233/35, 1.0245/49, 1.0255, 1.0262, 1.0283/84, 1.0293/94, 1.0302/1.0311, 1.0334/37, 1.0341, 1.0353/61, 1.0415/81, 1.0500, 1.0506 and 1.0522.

Above: 1.0646/56, 1.0669 and 1.0742/85.

Support:

Initial: 1.0050/56, 1.0029/34, 1.0018, 0.9993/98, 0.9984, 0.9969, 0.9945/60, 0.9931, 0.9922, 0.9902/07, 0.9899, 0.9858, 0.9814/26 and 0.9724/99.

Below: 0.9686, 0.9645, 0.9631, 0.9525, 0.9445 and 0.9405.

NZDUSD: Higher

Resistance:

Initial: 0.8532, 0.8561, 0.8571, 0.8584, 0.8605, 0.8641 and 0.8671/74.

Above: 0.8764 and 0.8840.

Support:

Initial: 0.8504/08, 0.8487/89, 0.8472/77, 0.8453/59, 0.8425/47, 0.8405/06, 0.8394/96, 0.8387, 0.8376, 0.8359/65, 0.8322/50, 0.8312, 0.8237/95, 0.8221/24, 0.8204/14, 0.8172/95, 0.8160/63, 0.8121/53, 0.8078/0.8109, 0.8030/52 and 0.8013.

Below: 0.7996, 0.7906/66, 0.7804/88, 0.7783/95, 0.7723, 0.7605/76 and 0.7500/85.

The ECB met market expectations at its last policy meeting of May 2 where the Governing Council cut the minimum bid rate by 25bps to 0.50%. The Board also agreed to extend the LTRO program.

A summary of the press conference stated that the bank expects a decline in economic growth for now and that leaves more room for continuous easing. The major news turned out to be that the ECB is now nursing the idea of negative deposit rates.

Although ECB President Draghi did say that it’s not an attractive alternative in the current situation. This means the markets will not price in such a move at the moment.

Most data within the Eurozone has been very disappointing in the past few months especially as indices from its biggest economies still show countries steep in recession territory.

Therefore analysts will start looking out for comments from Council members in order to expect a future shift in monetary policy.

Meanwhile, Japan’s unemployment rate has now dropped from 4.3% to 4.1% as household spending keeps improving. BoJ’s Governor Kuroda is already implementing bold policies that aim to jumpstart Japan’s economy with a weakening Yen.

Stronger exports and rejuvenated domestic spending are also results of improving sentiment among the general public, despite critics of the ambitious inflation target set by Prime Minister Abe.

All these point to the fact that the ongoing stimulus spending programs are producing positive results and that the overall economic forecasts are achievable.

This week, figures from Japan which include its Current Account and Leading Indicators will further help to decide the direction of the Yen.

Technical study on 4-hour chart indicates that EURJPY is due for a correction down to 125.10 from 130.10 so a short is recommended at the 100.0% fib level. 

Historically, the first Monday after non-farm-payroll usually ends up being the quietest trading day of the month – and this Monday morning is threatening to continue on that tradition. With the various bank holidays and festivals being honored globally, it feels a stretch to get overexcited on this first day of a new-week even amongst the spatter of Euro data already reported. The 17-member single currency continues to make some headway outright after French and German services sector data beat…

April Nonfarm Payroll in the US increased by 165,000, better than March’s revised-up 138K, and also beating economists’ forecasts around 145K. The unemployment rate also fell from 7.6% to 7.5%. This is a positive sign of recovery, albeit still a slow pace. The prospect of even more easing by the Fed could be lowered…

Draghi’s loose lips yesterday plunged the 17-member single currency through a three-cent handle before a bottom was found. The uttering of negative deposit Euro rates attempted to temporarily cripple the single currency ahead of this morning highly anticipated US employment report. The ECB did not need to take on any additional, more aggressive stimulus – instead they had Draghi mouthing deposit rates, which in effect, delivered the same impact as an aggressive cut. Investors were hoping for yesterday’s rate cut…

The Fed concluded its May meeting staying pat on the current pace of easing and low interest rate policy. It noted that economic activity is at a moderate pace and the jobs market has shown some improvement though still beleaguered. However it also warns of the challenge the current fiscal policy will have on limiting growth…

EUR/USD continues to move upwards in Wednesday trading. The pair crossed  the 1.32 line in the European session, as the US dollar continues to lose ground. The euro has taken full advantage of broad weakness by the greenback, and has gained over two cents in the past week. In the US, the markets will be hoping for good news from Tuesday’s key events – ADP Non-Farm Employment Change and the ISM Manufacturing PMI. This will be followed by the FOMC Statement…

If we did not have the Aussies, the RBA, or Governor Glenn Stevens, this would have been another bland and boring market to be talking about. Policy makers down-under certainly know how to surprise it seems, as very few analysts had predicted any movement by the Central Bank in their latest rate decision. The Governor has managed to keep markets on their toes by cutting overnight interest rates to a record low of +2.75% earlier this morning.
The ‘street’ in general…

The European central bank concluded its meeting and announced a 25 basis point rate cut to its minimum bid rate, bringing it down to 0.50%.
It lowered its marginal lending rate by 50 bps to 1.00%…

Watch the press conference with ECB president Mario Draghi as he explains the current monetary policy of the ECB as well as take questions from the press. The markets will be looking for clues on future rate cut and can cause some volatility in the EUR-crosses during this press conference…

A sure thing is always a dangerous bet and more so when it’s in reference to the ECB. However, it’s widely expected that that they will cut the benchmark interest rate by -0.25% to +0.5% this morning while keeping the deposit rate unchanged. The real surprise from Draghi and company could come from any further hint or announcement of non-conventional measures.
If the ECB only delivers a -25bp refi-rate cut without any non-standard measures, the market should be disappointed- weighing on…

EUR/USD continues to move upwards in Wednesday trading. The pair crossed  the 1.32 line in the European session, as the US dollar continues to lose ground. The euro has taken full advantage of broad weakness by the greenback, and has gained over two cents in the past week. In the US, the markets will be hoping for good news from Tuesday’s key events – ADP Non-Farm Employment Change and the ISM Manufacturing PMI. This will be followed by the FOMC Statement…

London, 14 March 2013 – Aggressive quantitative easing programmes from the US and Japan are creating a dilemma for the Chinese leadership, which may only be resolved by revaluing the China Yuan upwards versus the US Dollar. Inflation and unemployment are two major preoccupations for the Chinese leadership as a nasty bout of either can create social instability…

BoJ Statement

The RBA interest rate meeting concluded with a hold of the OCR at 3.00%. Here is the statement: http://www.rba.gov.au/media-releases/2013/mr-13-04.html. The AUD/USD continues a sharp rebound after breaking below a key support at 1.0150. The break is not clear, and could be a false breakout. A break above 1.0250 could be an initial sign of a bullish correction. However, a rally back above 1.03 is likely needed to break away from the bearish structure seen in the 4H chart…

USD/JPY gaped higher to hit 94.65 at the start of Asian trade on the speculation that Prime Minister Abe will nominate the ultra dovish Haruhiko Kuroda to the post of BOJ Governor, but the rally quickly fizzled with the pair dropping below the 94.00 level as there was no official confirmation from the government and…

BoJ: The Bank of Japan held its benchmark interest rate at near 0, as the economic outlook remains subdued with uncertainty in foreign factors as well. There was no additional stimulus coming out of this meeting, but the use of such action is clearly on the table if the economic conditions continues to weaken. “…it (BoJ) will pursue aggressive monetary easing in a continuous manner by conducting its virtually zero interest rate policy as well as steadily increasing the amount outstanding of the Asset Purchase Program.”…

Q2 GDP in Australia was reported to have grown 0.6%. This is below the 1.4% in Q1, and also missed forecast of 0.8% reading. This is the type of growth data that will continue fueling expectation of an RBA rate cut later this year. The AUD/USD continued its decline. The 1H chart shows the AUD/USD in a persistent bearish momentum as the RSI tags 30, holds below 60, and continues to tag 30. The moving averages…