Fundamental Recap and Outlook

Mon. June 6th

Of all the risk and commodity FX pairs, the AUD/USD held its ground today, falling the least today as speculators positioned themselves for RBA’s Rate Statement, some anticipating a possible surprise rate hike. With Friday’s weak NFPs and the US not expected to raise interest rates until late next year, buying the AUD/USD (selling the USD) makes the most sense if a hike or hawkish statement is expected. With safe-haven flows going into the JPY, the AUD/JPY could be the pair to look for a signal to sell, if you expect the RBA to be dovish this evening.
If the RBA’s statement is hawkish or the surprise us with a rate increase we could see the AUS/USD hit 1.08 and the AUD/JPY hit 87.00. If the statement is dovish with a cautious outlook, we could see the AUD/USD fall to 1.065 and the AUD/JPY fall to 85.50. The NZD/USD and cross pairs are likely to move with this report, as well.

Sun. June 5th

Friday’s Non-Farm Payrolls report and labor data highlighted that the recovery in the U.S. is quite week. Indicating that without government stimulus, it is non-sustainable. As such, expectations for the Feds to return to a normalized monetary policy by removing the stimulus or increasing interest rates were pushed back from early 2012 to mid-late 2012. Ergo, we saw major USD selling on Friday. Economic data expected from the US this week, is expected to continue to show a downturn in the US’s economy, and so we could continue to see USD weakness.
On Friday, the IMF and EU announced they will pay the next installment of Greece’s original bailout package. With this news, we saw the EURO rally. We should keep in mind though, that Greece’s debt is likely to expand to over 157% of its GDP this year. Therefore, either way you slice it, unless the aid packages reduces Greece’s debt, which is unlikely, in the longer term, Greek’s debt situation will put pressure on the Euro.

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