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Australian Dollar Higher – Could Retest 80 U.S Cents

By Joel Holmes

The Australian Dollar is stronger this morning when valued against the Greenback. The Aussie reached an overnight high of 0.7983. Yesterday we saw the release of monthly New Home Sales data for July. Australian new home sales tumbled to a four-year low in July, driven by a 15.7 per cent decline in apartment sales. While sales of detached housing fell by 0.4 per cent. Looking ahead today Australia will release monthly Building Approvals and Quarterly Construction Work Data for July. The AUD/USD pair is currently trading at 0.7952. We now expect support to hold on moves approaching 0.7930 while any upward push will likely meet resistance around 0.7990.

The New Zealand Dollar seesawed against the Greenback during yesterday’s session, having initially dropped 40 pips in early morning trade to a low of 0.7218 as news broke of missiles being fired by North Korea over Japanese airspace. The pair clawed back losses and with 73c in sight the Kiwi rallied to a high of 0.7298 on the back of broad based USD weakness. On the data front today sees the release of low tier data Building Consents, we can expect to see immediate resistance around the 0.7300 level with support sitting at 0.7220.

The Great British Pound projected a familiar pattern of trade throughout Tuesday edging lower against the Euro while holding firm against the worlds base currency. As tensions in North Korea escalate following missile flights over northern Japan, investors flocked to safety seeking haven assets and forcing Sterling lower. Having touched intraday highs at 1.2980 the GBP fell back to intraday lows at 1.2918 while EUR/GBP moved through 0.93 pence, edging ever closer to parity. Ongoing Brexit negotiations are expected to weigh on Sterling through the short term keeping gains against the USD in check, while we continue to enter oversold territory against the Euro a correction could come on the back of ECB commentary as the market looks to September as a marker for monetary policy amendments and QE tapering.

Markets were sent into turmoil yesterday morning after news broke of a missile fired by North Korea which flew over Japan. As expected there were large movements into safe haven currencies such as the Swiss Franc and Japanese Yen while waiting for confirmation on further news from the UN Security Council. USD/JPY recovered from three year lows overnight of 1.0830 after a flight initially into the Japanese Yen, finishing the day at 1.0960. Recoveries were seen overnight as the Euro surged above 1.20 for the first time since January 2015 and hit an intraday high of 1.2070, helped by a solid German GfK consumer climate reading and French consumer spending results overnight. Momentum was stalled, eventually pulling back to 1.1970 against the greenback in the North American session, helped by a solid increase in United States CB Consumer Confidence levels. Key events to watch overnight will be the release of the latest ADP Non-Farm Employment figures along with Prelim GDP for the 2nd quarter of 2017 in the United States.