AUD rebounds as the RBA surprises

FX markets continue to trade with volatility as a liquidity-reduced Easter Monday saw the dollar bounce back from a data-demised Good Friday. The market has been adjusting to below consensus data from the US in Q1 which has been attributed to the impact of poor weather conditions. The labour market report on Friday didn’t escape the downturn, which has led to suggestions that a US rate rise could be pushed out further as some now see a lift-off not commencing at all in 2015.

This week, the market will look for any discussions on the data weakness from the FOMC minutes as all eyes will now turn to the Q1 GDP release on April 20th. Forecasts have dropped to 1%, which even by adverse weather conditions is a long way from the 5% pace that was seen in the middle of 2014. The market is hanging onto the history of 2014, which shows that while weather conditions do matter, so too do the subsequent uplifts – although I do note that the dollar strength in 2015 may quash this similarity.

The euro continues to trade under pressure this morning as weaker PMI data across Europe adds to the technical failure of the 1.1050 level following the US jobs report. A rally in equity markets gives the dollar a boost from a risk-positive environment.

The RBA remains on hold at 2.25%, surprising the markets in what was the main event of the Asian session. The RBA’s April statement is remarkably similar to last month’s, with the only changes being new specific references to the falling capex and terms of trade, but references to further easing being appropriate remained as they outlined the need to analyse the impact of previous rate cuts. The market had priced in a 75% probability of a cut so it is not surprising to see the AUD trading 1% in European trading.

EUR/USD
Supports 1.0810-1.0615-1.0580 | Resistance 1.1050-1.1080-1.1170

USD/JPY
Supports 119.30-118.80-118.20 | Resistance 120.60-121.55-122.45

GBP/USD
Supports 1.4810-1.4740-1.4635 | Resistance 1.4990-1.5030-1.5170