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26 Jun 2013
AUD/USD, vigorous bounce on China's headline
FXstreet.com (Barcelona) - AUD/USD is rallying on headlines that the PBoC is apparently taking pressure of the interbank rates markets, with China rate swaps 1-year down more than 35bp today at 3.71% from above 5% late last week.
China's credit squeeze easing
The combination of an earlier headline in which the China Securities Journal reported that China liquidity may improve in July, coupled now with the reduction in rate swaps in the 1-yr curve, is all suggestive that the worst days of a liquidity squeeze may be behind us. The PBoC has also vowed to protect the stability in money markets.
Techincals favour further correction
In the scenario that China money markets starts to stabilize, it would be certainly make the case for a potential correction in the AUD/USD rate all more compelling. On the upside, a clear break through 0.93 first - double top intraday - , followed by 0.9330 - June 11 low - opens the doors for a greater recovery towards 0.94 - sequence of lows intraday through June 10,12 -. On the downside, a break below 0.9215 would disqualify the higher highs, higher lows structure intraday, thus potentially bringing 0.9160 back into play.
China's credit squeeze easing
The combination of an earlier headline in which the China Securities Journal reported that China liquidity may improve in July, coupled now with the reduction in rate swaps in the 1-yr curve, is all suggestive that the worst days of a liquidity squeeze may be behind us. The PBoC has also vowed to protect the stability in money markets.
Techincals favour further correction
In the scenario that China money markets starts to stabilize, it would be certainly make the case for a potential correction in the AUD/USD rate all more compelling. On the upside, a clear break through 0.93 first - double top intraday - , followed by 0.9330 - June 11 low - opens the doors for a greater recovery towards 0.94 - sequence of lows intraday through June 10,12 -. On the downside, a break below 0.9215 would disqualify the higher highs, higher lows structure intraday, thus potentially bringing 0.9160 back into play.