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China’s numbers in Asian trade yesterday set the tone and this carried through to European and US trade where we also received some encouraging manufacturing numbers. After an ordinary Q1, it certainly looks like the US is on track for a Q2 rebound, and this encouraged some positive price action across the equities space.
The risk currencies managed to extend their gains against the greenback with the AUD being one of the notable movers. AUD/USD finally nudged through April highs in the 0.946 region and extended its gains to a touch above 0.950. This saw the pair trade at its highest since November last year. After a period of consolidation around 0.940 heading into the RBA decision, it seems the pair had set enough of a base to extend its gains from.
The reaction to the RBA suggests the market was positioned for a dovish RBA, but with the ‘period of stability in interest rates’ line being maintained then this saw the market’s position shift. The market was not phased by the line ‘offering less assistance than it might in achieving balanced growth in the economy’ when referring to the exchange rate. In terms of where the pair might go in the near term, the previous uptrend line running from February is likely to offer some resistance, but this only kicks in closer to 0.955. Any dips into the uptrend support are likely to be used as an opportunity to buy.
On the calendar today we have trade balance data due out at 11.30 AEST while RBA Assistant Gov Debelle speaks later tonight.