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RIO report March quarterly production numbers pre-market today and naturally the focus is on iron ore and whether the miner can continue to hit target of 295 million tonnes. RIO sources nearly 90% of its earnings from iron ore, so this is really the main focus of traders today. Look for iron ore production of just over 51,000,000 tonnes, which would be a slight decline on the quarter (they produced 55,509,000 tonnes in Q4), but a rise on the year (they produced 45,643,000 in Q1). Capex is expected to fall below $11 billion and they have already stated this will fall below $8 billion by 2015.
I suggested buying EUR/AUD on a break of the downtrend on the hourly chart, which now comes in at 1.4780. The pair has actually found sellers overnight on the back of further dovish narrative from the ECB, which won’t surprise anyone. There seems good support around the 1.4650 level and the pair is now in play given we get the RBA minutes at 11:30am AEST and subsequently the German ZEW survey at 7:00pm. The market will focus on the any views on the currencies in the minutes, so any talk the RBA feel the currency’s strength is starting to work negatively against the economy could see traders selling the AUD. The ZEW is expected to show a slight increase in the ‘current situation’ part of the survey, but a slight deterioration in the outlook.
There are signs the pair could head down to the short-term uptrend at 1.6615 in the coming days. In UK trade at 6:30pm we get the latest UK CPI print and traders are expecting an annualised print of 1.6%. A reading of 1.6% would be the lowest read since October 2009 and a sharp pullback from the 5.2% levels we saw in late 2011. On the USD side we get empire manufacturing (or the New York read), which should improve, while we also get inflation data in the US too, although the level of inflation is not expected to change.
China is in play today with its monthly financing numbers due out. There is no set time, but good numbers today in the new yuan loans (expected to increase 55% on the month), aggregate financing (expected to increase 97% mom) and M2 money supply (expected to increase 13% yoy) should help continue the positive price action in this index.