This text is from blog famous currency strategist Joel Kruger .
ONE STEP BEHIND IS BETTER THAN TWO – After all was said and done, I must admit, I was marginally impressed with the latest RBA rate decision. While the Australian central bank left rates on hold at 3.50% as was widely expected, they at least managed to come back to reality just a bit, expressing concern over the recent deterioration in China data, while at the same time, conceding that they were surprised to see the Australian Dollar as strong as it was.
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BUT STILL ONE STEP BEHIND – Nevertheless, there is still a good deal of delusion over at the Reserve Bank, as Mr. Stevens and company consistently mitigate any global macro concerns with a misguided optimism for the local economy. As I have said many times over the past few months, this will come back to bite them. As the global recession intensifies in China, the RBA will be forced to take action and offer additional accommodation to monetary policy, which ultimately will weigh heavily on the Australian Dollar (other commodity bloc currencies and emerging markets) into Q4 2012 and throughout 2013.
EURO LOOKING TO JUNE HIGHS – Moving on, the Euro is attempting to establish back above 1.2600, and it looks as though a fresh higher low is now in place by 1.2465 ahead of the next upside extension towards key resistance at 1.2750 further up (June peak). The crisis in the Eurozone definitely appears to be stabilizing and while there is still a good deal of recovery that needs to happen, the mere pricing out of downside risk is already doing a great job of supporting the single currency. At this point, I would not recommend any overly aggressive EUR/USD long positions, but at the same time, I also would not be looking to get short. Stand aside here.
TRYING TO FIND EXCITEMENT IN OTHERWISE BORING YEN TRADE – Elsewhere, USD/JPY continues to chop around and the market once again finds solid support ahead of 78.00. At this point the daily price action is nothing to write home about, but it is worth noting that we are seeing a potential bullish reversal day in the works. Still, we will need to see a break and daily close back above 78.85 at a minimum to really relieve downside pressures and open the door for fresh upside beyond 79.65. I retain a very bullish medium and longer-term outlook, but would also not rule out the possibility for a drop back into the 77.00′s before the onset of the projected rally.
SILVER SURFER – On the commodity front, silver is the talk of the town, with the metal exploding over the past several days and outperforming against its peers. However, short-term technical studies are now severely overbought and it is probably time to start looking to build into a meaningful short position. I do not see these gains lasting much longer and would expect to see a material pullback in the days ahead, with any additional rallies very well capped below $34.00 on a close basis. The 61.8% fib retracement off of the yearly move comes in around $33.20 and selling towards this level is the recommended strategy.