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AUD Consolidates Post RBA Minutes Decline, USDJPY Resistance Holds

FOREX
  • A 50 pip round trip for the USD index following yesterday’s US holiday culminates in the DXY trading broadly unchanged on the session. Mixed performance across G10 sees the majority of currencies decline against the greenback, although the Japanese Yen outperforms amid the lower core yields.
  • AUD is the clear laggard across G10 currency markets following the overnight RBA minutes. Despite the RBA not showing explicit dovishness, market sentiment appears to have been influenced by subtle changes in wording regarding the necessity of additional tightening, along with the finely balanced decision on whether to raise interest rates or maintain the status quo.
  • AUD extended losses as risk off flows weighed and breached support at $0.6810 to trade as low as 0.6753 during the US session. The next support level is $0.6727 the June 12 low.
  • Gilts led a global bond rally Tuesday, with caution receding ahead of Wednesday's pre-market UK CPI reading. Lower core yields have benefitted the Japanese Yen specifically allowing JPY to move to the top of the G10 FX pile, with USD/JPY the best part of 60 pips lower on the day at 141.40 at typing. Initial technical resistance in the form of the 21 Nov ‘22 high (142.25) held to the pip before the pullback.
  • The aforementioned UK CPI on Wednesday brings attention back on to GBP ahead of the BOE decision on Thursday. Despite the gilt move weighing on GBPUSD all the way down to 1.2714, a late bounce shows that the pair is broadly consolidating its impressive advance last week. Moving average studies remain in a bull-mode condition reflecting current trend conditions and the topside focus is on 1.2877, the Apr 25 2022 high. Initial firm support is at last Thursday’s 1.2630 low.
  • Worth pointing out that EURSEK has extended its move to the upside and in the process, has printed fresh all-time highs at 11.8164, increasing the year’s advance to around 5.7%.
  • Aside from UK inflation data, Canadian retail sales will also cross before Fed Chair Powell will deliver the Semi-Annual Monetary Policy Report in congress.
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