EURAUD
Recently, the Australian dollar has received an unusually aggressive bid on firming indicators like trade, employment and retail sales; but the release slate was clear for today. This was the perfect fundamental setup for those waiting for a relief retracement to materialize, especially given activity coming on behalf of the cross. Out of Europe, two measures of growth proved the basis for a healthy spat of speculation for a more immediate interest rate hike from the ECB. For the Euro-zone as a whole, the regions economy grew 0.9 percent over the second quarter, the largest increase in 6 years and the first time since early 2001 that it has outpaced growth in the US. Germany, Europes largest economy, provided the bulk of the strong pace of growth. It too accelerated to a 0.9 percent rate of growth over the three months ending June according to the countrys government statistics office, setting its own five year high. For the period, generous contributions to GDP were provided by construction and investment from companies that were laden with export-earned revenues. Two additional yet unusual forces came on behalf of the World Cup and domestic spending ahead of sales-tax hikes expected in 2007. With growth ramping up, many expect the ECB will have to revise their conservative growth estimate for the year above its current 2.1 percent and in turn consider an additional two rate hikes by the end of the year.
Technically speaking, the EURAUD has made a weighty support level in the process of making its spike low to 1.6585. At the culmination of the days aggressive run up, price action has also proved resistance come at the expense of former support levels. Support at 1.6770 from intra-day trading over Thursday and Friday is now confirmed resistance for the further rallies behind the Aussie unit. Should the pair break this level of equilibrium a run up to last weeks swing high around 1.6925 would be an easy target due to the lack of intervening levels between the two points. However, if, as recent trading suggests, a move lower is in store, the 1.6585 floor would be more difficult to breech.
NZDUSD
The kiwi was offered two weighty indicators to consider during for Mondays session, though they were separated by a significant gap in time. Up first for fundamental digestion were reads of retail sales for June specifically as well as for the quarter ending in the same month. According to Statistics New Zealand, retail sales for the month alone advanced 0.1%, following the previous read of 1.5%. This was a stark contrast to the 0.5% decline for the quarterly read that negated the effects of inflation. Taken for face value, the data was hardly impressing; but a newswire problem at the time of the release put the bulls on the move. With further interpretation however, the slight advance was almost entirely the result of higher petrol prices, not discretionary spending that would actually suggest economic growth would rebound without the side-effects of faster inflation. After the correct analysis was performed, the NZDUSD quickly changed direction to more than make up for the unnecessary rally. The second indicator, ANZ vacancies ads for the second quarter, though higher than expected, could not dam the selling pressure. According to the later read that measures job ads as a proportion of employment, vacancies over the three months rose 9.4% as a record low jobless rate was making it harder to attract skilled labor.
Technically speaking, the NZDUSD was breaching into new territory in the overnight session. Resistance above the intra-day high at 0.6375 was practically non-existent until 0.6440. However, the sharp turn has taken that level out of the running until momentum to the upside can once again build. On the other hand, support seems well in place at 0.6275 as it represents former resistance from June 14th to August 4th. Should support give way, the NZDUSD could fall into the congestion range between 0.6275 and 0.6145 that has proven to be difficult to move out of before. A technically less resistant move would find the pair moving north once again to take on the two-month high.
AUDUSD
There was little tradable data coming out of Australia today, but action on commodities and speculation surrounding tomorrows US indicator releases provided a valid selling point for AUDUSD traders. On the set up for the pair, many market participants were already calling this pair overbought. The qualifier for such a statement rested with its inability to close beyond 0.7685 despite fresh indicators over the past few sessions that would otherwise light a fire under bulls. When commodities this morning moved lower, especially gold which slipped $8.60, the reasons for being long the commodity unit progressively slipped away. Another reason for the sharp sell off was speculation surrounding tomorrows US trade and inflation releases. Predictions already see the net foreign purchases of US securities to cover the goods trade shortfall, and for the PPI to continue to lay on the Feds ability to keep overnight rates unchanged. Should there be a further upward surprise in these indicators, a delayed sell off in the AUDUSD tomorrow would have been much more momentous.
Technically speaking, though the Aussie dollar reported a sizable decline against the US dollar, the range between the two dating back to July 27th is still intact. This range lies between the 78.6% fib and 61.8% fib of the 0.7795 to 0.7270 AUDUSD decline at 0.7685 and 0.7595 respectively. Since it is currently sitting at the bottom of the range, any serious move below support would be further backed by August 9th low at 0.7560. On the other hand, another rally that would keep the range alive would likely dry up at the consistent resistance level of 0.7685.
