The Aussie dollar has kicked off the week on the back foot following last week's much anticipated EU summit in Brussels, Belgium. The danger of disappointment put risk currencies in a vulnerable position last week, and it would be fair to say judging by movements in the ensuing hours - the EU summit only delivered a half-baked response to the concerns of market participants. Global equity markets may have been able to muster some short-term positivity; however currencies painted a different picture with US dollar support maintained across the board. The local unit was able to find intermittent support coinciding with strength from U.S equities; however with price action only just managing to peak above 102 US cents it was hardly an inspirational rally. In short, European Union nations agreed to lend the IMF a further 200 billion-euro's, to promote a tighter fiscal unity and budgetary controls while bringing forward the planned start date of the permanent rescue fund the European Stability Mechanism to July 2012. Prime Minister David Cameron vetoed any treaty amendments, in an effort to safe guard Britain's financial markets which proved to be a stumbling block for markets.
In terms of local event risk, there's little in the way of major market moving themes to guide the Aussie dollar's fortunes in the week ahead. True to form, investors will continue to look to events offshore for direction, namely the Euro-zone. In essence, the outcome of last week's summit is unlikely to provide the Aussie dollar with the window of opportunity needed to kick start momentum to the upside with EU leaders delivering not quiet the hole-in-one some corners were anticipating. This was a pivotal moment for risk currencies to begin an ascent given the moderately positive sign-posts coming from the U.S - however this opportunity has temporarily passed. Should we see further downside technical data points show pockets of support around 101.10 and 100.5 US cents with resistance firmly in place around 103.3/4 US cents to cap the upside.
The week ahead is littered with global event risk with the release of consumer price data from the Euro-zone and UK with CPI, FOMC rates decision among other top-tier news to be release from the U.S. Market participants will also be watching the respective bond auctions of Italy and Spain as a risk barometer. At the time of writing the Aussie dollar is buying 101.85 US cents.