Australian dollar supported by subdues tensions around Ukraine
This morning saw a contrasting start to the day's trading across the board with risk assets spiking higher after Russian president Vladimir Putin has ordered troops on military exercises close to the Eastern Ukrainian border to get back to base.
With tensions subsiding somewhat, The Australian dollar rallied alongside the Euro and the British pound in late Asian trading, while stock markets across the region rebounded sharply. We are looking at some key levels to determine whether its worth it to purchase daily call options.
In response to the proposed sanctions to Russia, the spokesperson for the Russian president has stated that should such be implemented by the US, the country will diversify its foreign exchange reserves away from the US dollar, this comment has also weighed on the dollar somewhat.
As the Reserve Bank of Australia has decided to leave interest rates unchanged the Australian dollar has rallied sharply. After the risk event has passed the market started digesting comments from the central bank and the result was a switch to the downside to test levels around 0.8910.
The test failed as the view on the future path of interest rates remained more or less unscathed. The central bank has maintained its position that the Australian dollar is overvalued, however it reiterated that it expects unemployment to rise further before it gradually comes down.
Additionally the RBA concluded that inflation is likely to remain within their 2-3% target for the foreseeable future. The pair has set a top at 0.8970 where there is a double top in place now. We would be buying daily calls on a sustained hourly break above that level.
However be vigilant as the next upside resistance is fairly close at 0.8990 and culminates just above 0.9000. On the downside for now we see the first support around 0.8920-30 with a break below to expose a test of the figure at 0.8900. Buying daily puts will be recommended in that case.