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Aussie steady against US dollar

By OFX

The Australian Dollar is steady this morning when valued against the US Dollar in what was a quiet night on currency markets. The Aussie reached a high of 0.7362 overnight on the back of broad dollar's weakness and a strong momentum in US equities. The S&P 500 briefly touched 2,900.

On the data front today we will see the release of Housing Industry Association (HIA) New Home Sales data for July. Tomorrow the Australian Bureau of Statistics will release private sector capex data for the June quarter which is expected to rise 0.9%, leaving annual growth at 3.5%. On Thursday there’s also data on July building approvals.

From a technical perspective, the AUD/USD pair is currently trading at 0.7334. We continue to expect support to hold on moves approaching 0.7300 while now any upward push will likely meet resistance around 0.7360.

The New Zealand dollars advance continued through trade on Tuesday extending beyond 0.67 as investors took advantage of broader US dollar weakness. Having flirted with moves above the 0.67 handle since Friday the NZD pushed through to intraday highs at 0.6727 on renewed demand for risk appetite.

The Kiwi was buoyed by news the US and Mexico had reached an accord that would overhaul and replace the existing NAFTA agreement. While merely a bilateral agreement at this point it goes a long way to easing trade related concerns and has prompted investors to unwind safe haven plays, bolstering demand for the New Zealand dollar.

Despite the renewed surge in risk appetite and break beyond resistance we still expect ongoing upside pressure on extended NZD rallies. A push toward 0.68 in the current environment will likely prompt profit taking as the gap between central bank interest rates and outlook for monetary policy continues to weigh on the Kiwi. Attentions this week remain with Thursday Business Confidence print with interim direction driven by risk appetite flows.

The GBP/USD wobbled in early London trade is it rallied to touch 1.2934 before fizzling out and leaving the cable a toucher lower on the day at 1.2870. A newspaper report indicating that BoE governor Carney has been asked by the government to stay on an extra year in an effort to provide stability in the year after Brexit was denied by UK treasury.

Strong second tier data out of the US ensured the London session highs were short-lived as the greenback strengthened against all majors. Although the data was second tier, it reinforced the narrative that sound growth is continuing in the US economy whilst price pressures also appear to be easing.

Brexit noise continues to plague the GBP with downside GBP/USD supports below the daily low of 1.2860 and 1.2835 with topside resistance in the 1.2895 and 1.2930 areas.

The United States Dollar consolidated its position for much of Tuesday as the quiet economic calendar left investors to ponder the recent US-Mexico trade deal. With the US Dollar Index (DXY) opening this morning at 94.72, the general tone of the USD remains consistent with the start of the week.

The US-Mexico Trade deal continues to dominate market sentiment in the absence of any new headlines or data. The positive news saw investors shift gears and support a ‘risk-on’ mood in global markets. While the currency movements have been modest, the market nevertheless, continued favouring USD counterparts as it awaits further news from the US-China trade front.

The USD was otherwise still weighed down by Jerome Powell’s dovish speech on Friday but also found assistance from the US CB Consumer Confidence figure which jumped to 133.4. The reading is the highest since November 2000 and helped the Greenback shrug off some of its negative movements. Overall, fortunes were mixed for the US Dollar in overnight trading with investors treading water ahead of any substantial news.

Attentions now turn to Preliminary GDP Quarter on Quarter numbers and the Crude Oil Inventories for direction, while keeping a close eye on the headlines.

The EUR/USD hit a 4-week high early in North American trading session on the back of a sliding Greenback. The pair touched 1.1733 last seen on July 31st, unfortunately the move was short-lived following the release of mostly positive data out of the US. Consumer Confidence unexpectedly rose in August to its highest level since October 2000 jumping from 127.9 in July to 133.4 in August. Meanwhile, the Richmond Fed manufacturing index rose to 24 in August from 20 in July, against consensus expectations for a decline to 17.

The EUR/GBP rate also rallied hitting a near one-year high, the pair touched 0.9098 and is trading a shade under at 0.9085 at the time of writing

Looking ahead today sees the release of German Gfk Consumer Climate, French Consumer Spending and French preliminary GDP

The next point of resistance is the July 31st highs of 1.1750 and support is sitting at 1.1660.

The Canadian Dollar rallied through trade on Tuesday, buoyed by news the US and Mexico had reached a bilateral trade agreement bolstering hopes the three-way trade pact, NAFTA, can be reformed. The Loonie pushed through 0.7750 after President Trump and Pena Nieto announced a preliminary agreement that solved many of the open issues and opens the door engaging Canada on broader NAFTA discussions.

The Tri-lateral trade agreement has long been a ley driver of CAD fortunes and while we are still some way off a reformed accord this week’s progress goes along way in easing fears talks will break down completely. Loonie direction will remain tied to ongoing trade discussions and with significant challenges still to be resolved there is still a strong possibility an agreement will not be reached before year end.

Attentions today turn to the Current Account balance ahead of tomorrow’s all important monthly GDP print.