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Euro Bounce Extends As ECB Policy Action In Focus, Antipodean FX Surges

FOREX
  • The Euro sits close to the top of the G10 pile Tuesday, with the release of several sources reports to Bloomberg and Reuters making a 50bps rate hike at this Thursday's ECB a certain topic for discussion - although the median consensus still looks for a smaller 25bps rise this week.
  • EUR/USD made light work of the Monday highs upon release, and briefly breached resistance through 1.0258, the 20-day EMA, before consolidating just below. A sustained breach of this average would strengthen bullish conditions and signal scope for an extension within the bear channel and would place the focus on the significant breakdown area between 1.0341-59.
  • The greenback is the poorest performer on Tuesday, extending the weakness noted on Monday as the USD Index (-0.67%) extends the pullback off last week's cycle high. The USD Index resides around 2.5% off last week’s peak.
  • Antipodean currencies clocked +1% gains amid the supportive price action for major equity indices. The Aussie dollar had outperformed during the APAC session as participants parsed the latest round of RBA comments and the pair marched higher throughout Europe. This places the AUD/USD (+1.32%) rate north of $0.69 for the first time since July 1st, briefly reaching touted resistance at 0.6912, the 38.2% retracement of the Jun 3 - Jul 14 downleg.
  • Bolstered risk sentiment also propped up Scandinavian FX, with SEK and NOK the main beneficiaries against the USD, rising around 1.8%.
  • Overnight, eyes on potential comments from RBA Governor Lowe, due to speak at the Australian Strategic Business Forum, in Melbourne. Inflation data from the UK and Canada headlines the data docket on Wednesday before the key risk events on Thursday – central bank meetings/decisions from the BOJ and ECB.
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