Daily Currency Update

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US Dollar Index edges lower


The Australian dollar edged upward through trade on Monday breaking through the 0.74 handle and approaching intraday highs near 0.7450. Bolstered by softer than anticipated U.S Manufacturing and signs of wider weakness the AUD found support having broken resistance at 0.7415 expanding on early gains as commodity price rallied. Led by an uptick in oil and base metals the AUD rallied to a 12-day high at 0.7445 before turning marginally lower into the close. Attentions today turn to the RBA’s minutes for direction as markets look break away from the current bearish downtrend and force a short term relief rally. A consolidation above 0.7410/15 may embolden Aussie bulls and enable an extended correction back toward 0.7480 with near term direction driven by commodities, however we believe the underlying bearish bias remains intact at present.   

Buoyed by an uptick in commodity prices the NZD edged higher through trade on Monday breaking briefly above the 0.69 handle to touch intraday highs at 0.6917. Having tested key technical supports at 0.6830 in the wake of the RBNZ decision to maintain its neutral monetary policy platform into the foreseeable future the Kiwi has found reasonable support turning higher as investors correct positions following softer than expected U.S Manufacturing data. With the NZD’s yield advantage expected to narrow come next months fed meeting the NZD could test new 2017 lows with a break below 0.6810/30 opening the door to a deeper correction toward 0.6750. Attentions today turn to RBA meeting minutes and commodity prices for near term direction.   

The Great British Pound is stronger today when valued against its US counterpart. After bottoming out near 1.2840 on Friday, the pound sterling managed to regain the 1.2900 handle reaching an overnight high of 1.2940. There were no macroeconomic releases in the UK yesterday. Today however attentions turn to multiple inflation figures for April, which if higher-than-expected, could result in a stronger Pound. The GBP/USD pair is currently trading at 1.2901. We now expect support to hold on moves approaching 1.2840 while any upward push will likely meet resistance around 1.2930.

The U.S Dollar remained on the back foot yesterday as US Empire State Manufacturing Index fell six points to -1.0 in May. In the survey, the firms that did respond showed a drop in new orders which was under zero for the first time in several months at -4.4. On the employment front, indexes remained positive in both employment and hours worked pointing towards continued improvement in the labour market. The softer than expected print supported EUR/USD pushing the pair towards 1.0989 as well as the CME FedWatch Tool moving from an 80% to 70% probability of a June rate hike. Meanwhile in China, retails sales rose 10.7% for the year to April which was down from the previous months reading, industrial production was up by 6.5% but missed expectations for a 7.0% increase, suggesting momentum in economic growth eased slightly in April.