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Aussie edges lower as oil prices weigh on commodities

BY MATT RICHARDSON

The Australian Dollar Enjoyed mixed fortunes throughout the global session yesterday enjoying gains domestically before suffering a downward correction throughout early European trade. The AUD/USD pair touched a high of 0.7624 and a low of 0.7566 and once again the 0.7630 handle is proving to be a somewhat strong resistance level. Domestically we saw the release of the RBA’s Monetary Policy Meeting Minutes from its June meeting where the central bank signalled some optimism about the state of the economy. While wage and inflation pressures remain a point of concern so too does the housing market, markets will now shift their focus on the RBA  and when they will start lifting rates.

The New Zealand Dollar opened yesterday at support levels of 0.7220 and advanced higher in the local session to an intraday high of 0.7265. The latest GlobalDairyTrade Price Index overnight declined for the first time in four months by 0.8% after a previous gain of 0.6%. The Kiwi slipped to 0.7230 against the US dollar after the release, the main reading of whole milk powder prices dropped 3.3%. Despite the limited movements, markets expects a boost in volatility in the lead up to tomorrow mornings RBNZ monetary policy meeting. While it is expected that interest rates remain on hold at 1.75%, the market is currently pricing at a 50% chance of a hike by May 2018. The NZD/USD opens at 0.7240.

The Great British Pound suffered key losses through trade on Tuesday touching two month lows, breaching the 100 day moving average and opening up possible moves toward and through 1.2550 and 1.25. Investors reversed gains enjoyed in the wake of last week’s Bank of England monetary policy meeting after Governor Carney reiterated the MPC’s commitment to accommodative policy, saying “this was not the time to raise rates”. Sterling moved through 1.2650 as additional downward pressures followed suggestions Standard and Poors would downgrade the U. K’s Credit Rating pending the outcome or Brexit negotiations. As both political and economic uncertainty loom over the British Isle the hard fought gain enjoyed through April and May could well face a correction and a move back below the 1.25 handle.

The U.S dollar enjoyed a second consecutive daily advance through trade on Tuesday touching three week highs against both the Yen and the Euro while pushing higher against commodity driven units as crude oil prices entered new bearish channels. Buoyed by a continued stream of hawkish FOMC and Fed commentary the greenback edged toward 112 JPY before stalling amid key technical resistance and the 100 day moving average at 111.85 while the Euro broke supports at 1.1130/40 touching intraday lows at 1.1119. Investors now seem to be catching up with the Fed’s hawkish outlook and we are seeing a possible shift in momentum falling a period of heavy selling. If macroeconomic indicators being to offer broader improvements and wage growth forces an uptick in inflationary pressures, then we can expect wider USD gains as we analyst look to monetary policy normalisation for direction. Attentions today turn to crude oil inventories as the primary item on the domestic docket while broader risk sentiment will govern flows into next weeks all important GDP print.