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Trading AUD/USD is tough right now, with neither the AUD bulls nor bears having any kind of clear control. Glenn Stevens may have increased his negative rhetoric around the high AUD, however the market had already priced this in given his speech last week. AUD/USD initially fell to 0.9464 after the RBA statement; however European-based traders pushed the pair back to 0.9537, although it is now below the 95 handle. At 11:30 today we get the latest Australian trade balance figures and the market expects a slight narrowing of the trade deficit to A$500 million. A number lower than A$500 million should put some upside risks in the pair, however trading the AUD via the crosses (i.e. anything other than USD) could be the best way to play the high yield and unlikely change in monetary policy for some time.
Gold looks like it wants to test the $1300 level, but we will need to see a strong number on Friday’s non-farm payrolls report, which is unlikely given the impact of the recent shutdown. In US trade tonight we get September leading indicators (expected +0.6%), while Fed member Sandra Pianalto speaks on the economy. The market is in somewhat of a sweet spot at the moment, with the Fed showing no rush to end QE, however it has recently emphasised the risks that QE brings, so with all this in mind it’s hard to make a strong case for either upside or downside in gold right now.
EUR/GBP has started to trend lower and fundamentally continues to make a lot of sense to trade on the short side. Whether we see a break of the October 1 low of 0.8332 will largely depend on what Mario Draghi says and does at tomorrow’s ECB meeting, with the European Commission cutting its economic forecasts modestly (the see GDP of 1.1% in 2014) yesterday. In the UK we get industrial production (expected at 1.8% year-on-year) and manufacturing production (anticipated to be 1.1% year-on-year) today; good numbers should continue to see traders add to EUR/GBP shorts.
We see a slightly stronger open today and should see the market supported today as investors and traders buy banks ahead of dividend payments tomorrow. At 16:00 we take 19.88 points out of the index as this will come out of the physical market on the open on Thursday.