GBP/AUD at 1.7 soon?

"Australia has been at the heart of the action today, with June building approvals showing that you can bring down the cash rate 200 basis points, but it doesn’t always translate into good housing data, and in this case a clear translation effect on the domestic economy," says Chris Weston at IG in Melbourne.

Approvals fell 6.9% in June (13% on the year), against expectations of +2%; what’s more, the May print was revised from -1.1% to -4.3%.

Governor Stevens talks the Australian dollar lower

In addition to the building approvals data, RBA governor Stevens spoke just after lunch and in a pre-prepared speech and subsequent Q&A session suggested the bank still had room to ease after the recent CPI data.

His words were dovish and backed up what he said three weeks ago when he argued ‘if the economy needs a lower exchange rate, it will probably get it’.

"This time he detailed that a lower AUD makes sense, and that expectations for a drop are fair. This is a man at the helm and not in any way concerned with the magnitude of the drop over recent months, happy to massage the local unit lower. AUD/USD hit a low of 0.9065 on these comments, and although the swaps market is pricing in an 86% chance of an August cut, you have to think that if the RBA doesn’t move, then it would looking at something that no one else can see. There is even a joke on the floor that the banks should come out today and pre-announce cuts," says Weston.

IG remind us that they have been calling the pair to trade the range of late, but you have to feel the recent lows could be under threat.

"One feels the AUD should see further downside. Keep an eye on EUR/AUD, which is a momentum trader’s dream right now and is continuing to print higher highs. Stay short AUD/NZD," says Weston.

Sean Lee at FXWW says that the Euro / Australian dollar exchange rate should make a move back to the 1.5 level in coming sessions:

"Most of the oversold characteristics have been unwound and we will return very soon to longer-term neutral levels. Proof once again that the FX market is one great big range trade!

"Next technical resistance target is a weekly high near 1.5000 and any dips now back towards 1.4400 should be well supported."