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Australian Dollar Rally Limited After RBA Leaves Rate Unchanged

Heading into Tuesday morning’s RBA rate decision, the market pegged a 75 percent probability that the central bank would follow up on February’s easing with another 25bp cut to a 2.00 percent benchmark. Given that level of speculation and the tumble from the Aussie dollar in preceding week, the central bank’s decision to hold necessitated some speculative adjustment. The Aussie’s rally was broad, but it is lacking for gusto. The statement makes it look like a deferred easing, not an impossible one. And, a ‘no change’ policy isn’t an active outcome.

British Pound Heartened by PMIs but BoE Warning Echoes

On the data side, the British Pound’s fundamental bearing seemed to improve this past session. The UK’s Composite PMI reading for March rose sharply to a 7-month high. Given the economy is one of the more robust in the developed world and the BoE is still in second place for returning to rate hikes (seen as March 2016); data like this could help shift the 10-month, nearly 3,000-pip GBPUSD tumble. Yet, the market refuses to pay the BoE as much hawkish speculation as the Fed. Meanwhile the central bank has repeated its warning of financial risks.

Japanese Yen Little Moved by BoJ Decision to Keep Unprecedented QQE Program In Place

The Bank of Japan deliberated on monetary policy this morning and there were no significant surprises. The group maintained the pace of its QQE program – an ¥80 trillion increase in the money base – in an 8-1 vote that once again finds Kiuchi calling for a shift to a ¥45 trillion target. Since the introduction of the BoJ’s stimulus program back on April 4, 2013, its balance sheet has doubled to ¥322.6 trillion. This effort competes with the ECB for girth of active easing programs, but appetite for further expansion has certainly waned over the months.

Emerging Market Benchmark Stalls After Hitting 2015 High, Ruble Slowly Gains

After its surge these past few weeks, the Emerging Markets have taken the top spot for 2015 performance among the most common ‘risk assets’. The MSCI ETF has rallied as much as 6.7 percent from its March 26 low and moved on to set highs last seen in mid-December. That said, conviction seems to be flagging the move. Volume has dropped as new highs have been reached. Similar hesitation is showing through in EM currencies. The Russian Ruble however, is attempting to maintain its slow advance, up 0.8 percent versus the USD this past session.

Gold Advance Losing Momentum and Volume

Gold is attempting to extend its rebound from its March swing low at $1,142 to its fourth week of advance. Yet, despite crossing a few noteworthy levels, the conviction behind the move seems to be drying up the further the metal progresses. On the one hand, we learned from the COT figures that net speculative futures interest posted its biggest increase in long exposure in nine weeks (25,738 contracts). On the other, volume behind futures has steadily declined with the April extension – Tuesday marked the lowest volume in 2015 – while ETF holdings of the commodity has dropped to a January low on a 3.8 percent purge from the February 24 peak. If the Dollar sacrifices itself with a plunge, gold bulls may find their cause refreshed. Otherwise, this is looking like a familiar pattern of reservation for the market.

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ECONOMIC DATA

SUPPORT AND RESISTANCE LEVELS

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CLASSIC SUPPORT AND RESISTANCE

INTRA-DAY PROBABILITY BANDS 18:00 GMT

--- Written by: John Kicklighter, Chief Strategist for DailyFX.com

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