FXStreet (Mumbai) – The AUD/USD pair retreated 0.30% in the Asian session, tracking the dip in the Iron ore prices. The price of iron ore fell almost 4%, its third consecutive day of losses for the commodity, thereby pushing the AUD lower against major currencies. The AUD/JPY breached its 200-DMa providing more power to the AUD bears. The New Zealand dollar traded under pressure too, as investors look to the FOMC statement for confirmation regarding the diverging monetary policy path adopted by the US Fed and the RBNZ.
Meanwhile, the USD/JPY pair traded largely flat around its hourly 50-MA currently located at 123.44 levels. The decline in the Japanese trade deficit was largely ignored by the markets.
Key Headlines in Asia
Iron Ore price falls almost 4%, weighs over AUD
AUD/USD at critical bearish levels on iron ore prices
Dominating themes in Asia – centered on JPY, AUD, NZD
The Asian session was quiet as the investors await the FOMC statement and the interest rate ‘dot chart’ for a clear signal on when the Fed could start to raise interest rates. The only major story in the Asia was a sharp decline in the Iron ore prices, which drove the AUD/USD pair to a session low of 0.7716 levels.
Heading into the FOMC statement later today, the Kiwi appears as the most vulnerable currency to a hawkish Fed tone. Last week’s RBNZ rate cut put focus back on the growing policy divergence. Consequently, the NZD/USD pair fell 0.30% to 0.6966.
Asian stocks rose for the first time this week amid speculation the Federal Reserve will signal a slow pace of monetary tightening at the end of its monthly meeting. Hong Kong’s Hang Seng Index inched 0.3%, while Financial and telecommunication stocks pushed the S&P/ASX 200 higher by 1%.
The bond markets show, yields on Japanese 10-year government notes fell one basis point to 0.49%. Similar maturity Australian bonds yielded 2.97%, down four basis points.
Heading into Europe – centered on EUR, GBP
Ahead in the day, we have a heavy UK economic calendar – Bank of England minutes, UK monthly employment and hourly earnings data. The BOE minutes will be released Wednesday and they are expected to show a 9-0 vote to keep policy unchanged. The average hourly earnings are seen rising 2.1% year-on-year in three months to April.
The Eurozone CPI for May is also due for release today. The data is seen printing in line with the preliminary estimate of 0.2% month-on-month and 0.3% year-on-year. The markets will also keep an eye on the US-German 10-year yield spread, which widened to 154 basis points from the low of 145 basis points seen last week.
FOMC – No one is expecting the Fed to announce a policy change at this meeting, but the markets will hang on every word of the statement and Yellen’s comments in the press conference that follows. The markets will also asses the Fed “plot the dots” release at Wednesday’s meeting.
EUR/USD Technicals
As per the AceTrader research team, “Despite euro’s brief rise to 1.1330 on Tuesday due to short-covering, subsequent intra-day sell off to 1.1204 suggests further choppy trading below last Wednesday’s 3-week peak at 1.1387 would continue and with mild downside bias, below 1.1204 would extend weakness to 1.1175/80 but support at 1.1151 may hold today. On the upside, above 1.1295/97 would prolong sideways trading and may bring another bounce to 1.1320/30.
(Market News Provided by FXstreet)