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Quick thoughts on AUD/EUR

Written by Sam Coxhead on June 29th, 2011.      0 comments

10:20 AM (NZT)  Just a quick update with thoughts on this  AUD/EUR. The EUR has seen a bit of a bounce back this week, as the market looks to take back sold EURO positions ahead of the Greek austerity vote. From what I have read it is likely that the Greek parliament will pass the vote, if only by a small margin. The rally back in the EURO could end up being a buy the rumour and sell the fact type of scenario, but we will have to wait until tomorrows vote to see what pans out. The French have also garnered support for banks to voluntarily roll short term Greek debt holdings in to 30 year bonds, and this has definitely helped improve sentiment, but again it remains a concept at this stage. Chinese Premier Wen has also been on the road around Europe, pledging Chinese support for the EURO and European debt.
The current interbank level of .7335 represents fairly good value buying of EUR with AUD, albeit down from higher levels seen recently. Weighing on the AUD has been the slowing down of the global growth outlook. With the AUD being a proxy for global growth, it is understandable to see a little pressure come into the market.
Last week’s RBA Monetary Policy Meeting minutes have added to the bias of reduced investor exposure to the AUD. The reduction of further cash rate rises in Australia in the short term reduces the attraction of the “fast money” community.
Looking forward, the pair looks comfortable in its .7200-.7500 range, but any kind of break down through the .7200 level may herald a move lower towards more historically average levels.