AUD range bound ahead of key wage growth data
Monday 14 May, 2018
Daily Currency UpdateThe Australian Dollar maintained a tight trading range throughout Friday, closing the week marginally higher. With little macroeconomic data on hand to drive direction the AUD muddled along between intraday lows at 0.7520 and Australasian session highs at 0.7540 before broader USD weakness bolstered returns into the weekend. The worlds base currency retreated for a 3rd consecutive day and while losses were largely muted investors appeared content in banking profits and reassessing positions allowing the AUD to touch highs at 0.7568.
Upside momentum remains difficult to foster however the speed of the AUD depreciation has seemingly stalled as the US Dollars upward trajectory shifts pace. While the broader picture remains largely unchanged a shift toward more stable risk sentiment, stalled treasury yields, softer CPI and labour market data and amendments in Fed speak have tempered expectations for a 4th rate hike this year. This moderation has enable the AUD to largely hold onto support above 0.74 and 0.7430 and avoid the next bearish step down to ranges between 0.7230 and 0.7380.
Attentions now turn to all important wage growth data Wednesday and employment data Thursday as key drivers of domestic direction.
Key MoversThe New Zealand dollar finished the week 1% lower as it closed below US 70 cents for the first time this year. Opening Friday morning at 0.6965, we saw slight movements higher after the release of Business NZ Manufacturing Index. The released showed the sector in a continued position expansion for the month of April and the highest reading of 58.9 since 2016.
There was little shift after the release of NZ Food Price Index figures shortly after as we saw eventual intraday highs of 0.6982. Despite Inflation figures in the United States slightly missing expectations on Friday evening at 0.2%, the Kiwi saw an eventual close lower of 0.6955.
Domestic news is light on this week with a focus on the latest Global Dairy Trade Auctions out Wednesday as the New Zealand Dollar opens this morning at 0.6960.
The Great British Pound is slightly stronger this morning when valued against the US Dollar, trading a 24 hour high of 1.3546. Looking ahead this week and all eyes will be on Tuesday’s employment data release which is expected to remain steady at 4.2 percent.
Wages are forecast to have posted a modest advance in the three-month to March, coupled with easing inflation, should further dent chances of any future interest rate hikes. The GBP/USD pair is currently trading at 1.3543. We continue to expect support to hold on moves approaching 1.3490 while now any upward push will likely meet resistance around 1.3580.
The USD closed the week almost flat, after being down more than 0.3% during Friday session the USD was able to recover on the back of a spike in US Treasury yields after stronger than expected US Sentiment data (University of Michigan U.S. sentiment Index came at 98.8 vs. 98.3 expected).
After three straight weeks of rising, the USD couldn’t manage to close the week higher, apparently finding some topside resistance at its 55-week moving average.
Consumer sentiment on Friday was unchanged vs April close, the University of Michigan indicated that optimism from tax cuts was offset by the potential impact of tariffs.
For the week ahead, markets will continue paying attention to US-China trade talks as China is planning to send Vice Premier Liu He to Washington. On the Geopolitical front, the US will be opening its new embassy in Jerusalem while on the data front, traders will be watching how US retails sales performed in April.
The Euro advanced on Friday, up 0.2% versus the USD. Although the EURUSD was not able to break the 1.20 level, the pair climbed as much as 0.4% to 1.1968 on Friday, it’s highest level since last Monday, but couldn’t keep the upward momentum as US Consumer sentiment data came slightly better than expected, supporting some USD demand towards the end of the session.
This was a challenging week for the EUR, testing new year-to-date lows but at the same time managing to hold support on its 55-week moving average around 1.1830. Important levels to watch going forward will be 1.20 and 1.2020, technically speaking, a break above those levels could trigger more EUR demand as the currency breaks from the downward trading range experienced since the beginning of the month, between 1.18 and 1.20 and tries to climb back to the upper range (1.22-1.24) experienced between February and April.
This week will bring some interesting developments as the EU will get an update on Brexit, while Angela Merkel will be meeting Vladimir Putin. On the data front, markets will be paying attention to the latest GDP and Industrial Production numbers on Tuesday plus Consumer Price Inflation on Wednesday.
The CAD couldn’t hold gains on Friday and was one of the few G-10 currencies to weaken against the USD as oil prices weakened more than 1% during the day. Still, the loonie managed to close the week more than 0.4% stronger versus the USD.
USDCAD closed around 1.2790, up 0.2%, after Canadian employment data came weaker than expected (net change in Employment was -1k vs. 20k expected). Up until then the CAD was more than 0.20% up versus the USD, with the USDCAD trading as low as 1.2730.
NAFTA talks will continue this week, and they seem to be going well, at least according to Canadian Foreign Minister Chrystia Freeland.
- AUD/NZD: 1.0780 - 1.0890 ▲
- GBP/AUD: 1.7780 - 1.8040 ▼
- AUD/USD: 0.7430 - 0.7580 ▼
- AUD/EUR: 0.6230 - 0.6360 ▲
- AUD/CAD: 0.9550 - 0.9710 ▲