The euro position scale in a market surprised by the cut in rates in Australia
Sydney - November 4, 2008 - In the currency market today highlights the decision of the Reserve Bank of Australia to lower interest rates 75 basis points, this represents a discount surprise to analysts who were expecting declines of 50 basis points. The Australian dollar is depreciating, while the euro has come to touch the 1.30 U.S. dollars.
We must remember that with today, are already 200 basis points decrease in Australia in less than two months and, as the previous drop was the first of the coordinated sales worldwide.
The Australian dollar (USDAUD) depreciating against the major crosses fewer than would be expected by a drop in rates of these features. Raw materials have helped with their highs, something to offset the downward pressure suffered by the Aussie.
It is important to note that this currency movements are, in large part, the result of the operations of carry trade, as Australia has been a major recipient of these speculative movements due to its high interest rates. What is important is the rate differential between the countries in which investors are financed (low interest rates) and those investing, and these differentials, if the discounts are produced globally, do not vary substantially. The strong performance of Asian stock markets these past two days, has also helped the Australian currency.
The rest of the market
The yen (JPYUSD) gets to see penalized by the Nikkei rises. The currency, therefore, continues to provide a respite from Japanese monetary authorities, but we must not forget that the tendency of financial markets is bearish, and that to the extent that they are going to have declines in the stock markets, you'll see, revaluations of yen. If this occurs, it is not ruled out in this currency movements caused by actions of the bank of Japan and Ministry of Finance to put pressure on its currency to the bottom.
The euro (EURUSD) at this time maintains levels of 1.30 dollars, with the greatest advances against the greenback in one session since its birth in 1999. The single currency has hit a daily maximum at 1.3008 and a low of 1.2527 in anticipation of the rate decision next Thursday. It is expected that the European Central Bank (ECB) cut the price of money around 50 basis points.
The euro-dollar exchange still does not give us any reliable signal at this time, no upward or downward. The key support in the short term is at the 1.2320 and resistance at the 1,3250-1,3260. Only if confirmed over the resistance would continue upward toward the zone of resistance of 1.40 (through which passes the main guideline bassist) while losing the support above the drop goal for the European currency as stand at 1.1635.
Source: El Economista