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Fundamental Afternoon Wrap: CNY and AUD top the polls this afternoon

FXstreet.com (Barcelona) - On a quiet day for European and US data, this afternoons institutional research has seen analysts looking slightly further afield for their subject matter. There has focus fall on last night's Chinese data miss and the upcoming RBA minutes.

CNY

Brown Brothers Harriman analysts have put last nights Chinese data disappointment at the top of their focus, noting that it weighed on sentiment for the dollar bloc and emerging market currencies, ostensibly through the commodity link. They add that one of the most striking observations on Chiná economy is that from a high level, that each unit of capital is producing less units of output. They write, “The process appears to be accelerating. The economic returns to capital are diminishing more quickly.“ In light of the data disappointment, Ting Lu of BAML is expecting slightly more supportive policies. He is expecting the PBoC to ensure adequate interbank liquidity and hold repo rates and is not expecting any rate changes in 2013.

AUD

Brown Brothers Harriman analysts note that tonight will see the RBA publish its latest minutes and that the bank does not appear to be in any hurry to resume its monetary easing. They write, “Barring a significant deterioration in the economy, or prospects, we now recognize that it is unlikely the RBA cuts rates in Q2. Previously, we thought a move in late Q2 was possible.” Westpac strategists feel that given the BoJ/Fed wall of money, the Aussie had a great chance last week to take out the Jan highs around 1.06 but it is hard to ignore the slide in base and precious metals prices, increased pricing for RBA easing and the deflating China GDP report. They feel that this leaves AUD finding buyers with a 1.03 handle but failing in the mid-1.05s.

Forex: USD/CAD finds support at 1.0190, back above 1.0200

After falling around 35 pips from 10-day high at 1.0235 in the US opening bell, the USD/CAD has found support at 1.0190, where the pair has bounced to trade back above 1.0200. Currently the USD/CAD is pricing at 1.0207.
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Forex Flash: Recovery looms for gilts – RBS

According to Technical Strategist Dmytro Bondar at RBS, “Gilts were held at 118.61, the 123.6% Fibonacci projection from the March impulse wave. There also was an island reversal; formation on Friday, suggesting the gap and Fibonacci level of 118.97 to become a major support. Looking for a recovery to 119.56/93 onto 120.50 on the stipulation of a sustained break below 118.61”.
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