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Australian dollar remains above 72 US cent handle

By OFX

The Australian dollar pulled off from one-month highs to start the week holding vicariously above the US 72 cent handle. Opening Monday morning at 0.7195, the Aussie stalled in its rally following Friday night highs of 0.7258.

Melbourne Institute released their monthly inflation gauge showing a slowdown in the prices of goods and services purchased by consumers from 0.3% to 0.1%. Another low impact release for the morning included ANZ job advertisements increasing for the month of October by 0.2%.

The AUD/USD peaked overnight at 0.7218 following a tight day of trading ahead of todays Central Bank meeting. It is expected the Reserve Bank of Australia will keep interest rates on hold at 1.5% with rhetoric to remain a neutral outlook despite the decline in recent property prices nationally and subdued inflation.

The Australian Dollar opens this morning at 0.7210.

The New Zealand Dollar gathered momentum on Monday against the worlds reserve currency. Having initially opened the start of week at 0.6645, the pair edged higher towards 0.6676 as the US Dollar came under pressure on the back of weaker US treasury yields and US imposing sanctions on Iran. Markets are remaining cautious on US mid-term uncertainty as well.

The is no local data due and with the US mid-term congressional elections approaching it could see the Kiwi gain momentum should Democrats gain a majority.

On the technical front, support can be found at 0.6630 and on the upside resistance sits at 0.6690. Analysts are forecasting the downtrend in the NZD/USD could be closing in but could still be a little early to sign off on it. A clear break above 0.6730 will provide more confidence in the market.

The start of the week was a mostly quiet affair for currency markets besides the Great British Pound which swung around on Brexit headlines but ultimately opens unchanged at 1.3040. Brexit news and rumours continue to move the Sterling with neither side confirming or denying that certain agreements have been all but finalised.

Over the weekend, the Sunday Times claimed that the UK and EU had reached an agreement on the customs union, with the EU conceding a significant concession to allow the UK to avoid a hard border, albeit temporarily. Downing Street was quick to condemn the report however, citing the news as speculation. Nevertheless, the Sterling traded higher on the news as the Greenback failed to find demand ahead of its key mid-term elections.

The relatively strong performance by the Pound was however tempered by a poor reading in the Services PMI report released on Monday. UK Services PMI came well under market expectations and hit its lowest reading since March. This added to other PMI releases around the world with China’s Caixin services PMI also well undershooting expectations. Overall, the data points to a slowing global growth environment as has been widely predicted amidst the US-China trade war.

The Sterling is now set to enjoy a quiet day on the economic calendar. All eyes however will be looking out for Brexit headlines and US mid-term election news for direction.

The Greenback drifted lower against all of the major pairs overnight with investors anxious before the U.S. midterm congressional elections. The Democrats are favoured to wrest control of the U.S. House of Representatives on Tuesday, and Republicans are expected to retain their majority in the Senate. Market analysts warned that an unexpected outcome could trigger a massive unwind of long dollar positions and undermine the greenback.

On the data front yesterday in the US October Markit Services PMI came in at 54.8 better than the initial estimate ad above the previous 53.5 and ISM non-manufacturing PMI for the same month resulted at 60.3 beating expectations of 59.3 and retreating from the record high of 61.6 achieved September.

From a technical perspective, the euro fell to a daily low of 1.1353 during the London session. The Aussie dollar is supported back above 0.72 cents this morning.

The Euro edged back above 1.14 through trade on Monday as investors checked recent US gains ahead of today’s congressional midterms. Having met sustained pressure through the last three weeks the 19-nation combined unit enjoyed a short-term respite as markets and analysts focus turns to what could be the most important midterm election in 50 years.

The single currency has struggled to shed a bearish bias through the last 7 months and ongoing political uncertainty, global growth concerns and Italian fiscal uncertainty continue to weigh on markets appetite for change. While optimism surrounding ECB policy change suggests there is long term upside opportunities the burgeoning gap in central bank monetary policy continues to cast a specter over moves pushing through 1.1450 and approaching 1.15.

Attentions remain squarely fixed on US politics through trade today. While a split congress is the favoured and expected market outcome a surprise result wherein either side wrests control of both the house and the senate could trigger an unwind of recent USD gains and offer a catalyst for short term Euro upside.

The Canadian dollar is weaker this morning when valued against the Greenback falling from a one-week high against the greenback (1.3115) after investors deemed domestic jobs and trade data not strong enough to raise bets for another Bank of Canada interest rate hike next month.

On the local data front there are no scheduled releases today.

From a technical perspective, the CAD/USD pair is currently trading at 1.3108. We continue to expect support to hold on moves approaching 1.2970 while now any upward push will likely meet resistance around 1.3200.