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Australian Dollar rebounds on a bullish trade surplus

By OFX

Recording another impressive trade surplus in March, accounts released by the Australian Bureau of Statistics yesterday showed Australia’s trade surplus rose to $1.527 billion in seasonally adjusted terms. Comfortably exceeding expectation, additional positivity was thrown into the mix domestically following the release of numbers which revealed dwelling approvals rose by 0.2 percent in March.

Noting the Australian dollar has now settled at a much lower tier following the aggressive sell signs which materialised last week, trading ranges yesterday of 0.7485-0.7542 were mainly in line with what witnessed during Wednesday’s session. In looking for an important weekly close now above the 75 US cents barrier, it appears topside progress will remain capped for the time-being in the absence of any weighty greenback moves.

Opening marginally stronger versus its US counterpart at a rate of 0.7532, investors will be keeping close tabs on today’s monetary policy report from the RBA should policy makers provide deeper context behind their decision on Tuesday to keep interest rates on hold.

Momentum for the bullish US Dollar has taken a breather overnight as the New Zealand Dollar reached oversold territory in the past months decline. Reaching a yearly low of 0.6982 early yesterday morning following the release of FOMC minutes, The Kiwi has potentially turned the tide and bounced off psychological support levels at US 70 cents over the past 24 hours.

Opening the morning at 0.6995, Upside ensured after a positive monthly reading of ANZ Commodity prices in April gained 1%. The main catalyst for the increase was a boost in dairy and aluminium prices after trade tensions between USA and China. With a close above US 70 cents in the domestic session, we saw an eventual high of 0.7045 in overnight trading after a weaker Non-Manufacturing PMI print in the United States.

NZD/USD opens this morning at 0.7040 and with no domestic data out today we look towards Non-Farm Payroll figures this evening.

The Great British Pound overnight reached a 4-month low of 1.3538 against its US dollar as the local data release of UK Markit Services PMI was up to 52.8 in April from 51.7 in March, but below market's expectations of 53.5.

The GBP/USD pair is relatively unchanged from yesterday currently trading at 1.3571. We continue to expect support to hold on moves approaching 1.3530 while now any upward push will likely meet resistance around 1.3600. Looking ahead today and all eyes will be on the US Payrolls, yet even if the data falls below market expectations, the chances of a Sterling strong recovery remains limited.

The dollar was not able to continue with its winning streak as risk appetite recovered a bit after Mark Calabria, chief economist for U.S. Vice President Mike Pence, called Thursday’s trade talks with China “fairly positive”.

Equity Indexes in the US fell initially below their 200-day moving averages, for the second time since June 2016, but the risk-off tone shifted after Calabria comments and the S&P managed to recover more than 1.3% from the lows of the day. Still, markets don’t seem too keen to jump into risk mode, despite pairing losses, stocks still closed in negative territory and US Treasuries gained in price (yields dropping slightly more in the long end of the curve).

On the data front, it felt markets payed special attention to the miss in the ISM non-manufacturing Index, which came at 56.8 versus 58 (expected) and was probably the main catalyst behind the initial sell-off in stocks.

Later tonight we have the always important Non-Farm Payroll number and depending how that goes and where US Yields move from here, we will probably get a clearer picture of what is next for the USD. Additionally, expect more headlines coming from US-China trade talks.

The Euro was able to recover from latest session’s weakness, rallying as much as 0.3% versus the USD, to close around 1.1988. The pair was not able to break consistently through the important 1.20 level and it failed to test the 200-day moving average of 1.2017 but it still managed to shake off weaker than expected Core inflation data (0.7% vs. 0.9% expected) and comments from ECB’s Executive Board member Peter Praet that the Eurozone economy is moderating:

“The latest incoming information points towards some moderation in the pace of economic growth, in part reflecting a pull-back from the high growth rates observed at the end of last year”.

EURUSD traded on a relatively tight range between 1.1948 and 1.2009. First support stands around 1.1937 while the 200-DMA will continue acting as resistance at 1.2017

The USDCAD continued to trade within its recent tight range between 1.28 and 1.29, but the loonie managed to close on positive territory around 1.2846, improving around 0.3% versus yesterday’s close at 1.2882.

The loonie initially dropped on the back of weaker oil prices, worst than expected trade figures and concerns about the housing market as Toronto home sales were reported to be at their weakest start since 2009. Then, risk sentiment improved a bit, the USD lost some ground and oil prices recovered, which certainly helped the CAD to recover and settle around 1.2850, where it is now opening.