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Aussie falls 0.7% as global risk appetite retreats

By OFX

There weren’t too many themes to drive the market movement over the last 24 hours but nevertheless, there was some significant movement. Risk-sentiment shifted again with equity markets softening modestly and the Greenback and US bonds moving higher. Within this context, the Aussie opens this morning at 0.7139, a drop of around 0.7%.

One touted reason for the withdrawal of market sentiment is the on-going military stand-off between India and Pakistan, although there was also plenty of positive news with Prime Minister May relenting to the possibility of an extension of Article 50. Fed Chair Powell’s testimony to the Congress also held few gremlins and had little effect on the market.

Moving into Thursday, the Aussie enjoys a slightly more interesting domestic calendar with private capital expenditure’s due for release.

The New Zealand dollar fell through trade on Wednesday having failed to break through resistance at 0.69 U.S Cents. The NZD was one of the day’s worst performers, losing 60 points against the USD and touching intraday lows at 0.6836. With little of note driving direction, the Kiwi appears to have fallen victim to a correction in equity markets amid uncertainty surrounding US-China trade talks. The USD advanced against most majors as trade delegates sounded a warning, suggesting there are still significant hurdles to work through before a deal is secured. The comments dampened recent investors optimism and forced investors to adopt a more cautious tone, driving a sell-off in the CNY and NZD.

With broader direction still governed by global risk trends, today’s ANZ business confidence report offers some domestic direction amid a slew of US data sets. We expect the Kiwi to remain within recent short-term ranges, supported on moves approaching 0.6750 with resistance at 0.69 intact.

The Great British Pound continued its positive run, as it yet again reported in as one of the best performers over the last 24 hours. Rising a significant 0.4%, the Sterling opens above the import 1.33 mark at 1.3307. The market moving news came from Prime Minister Theresa May after she relented and allowed Parliament the option of extending Article 50. The market reacted positively to the news as the probability of a no-deal Brexit scenario continues to recede.

Moving into Thursday the UK Parliament will vote on a number of Brexit-related amendments although there should be few surprises. Otherwise, the Sterling looks set to enjoy a quite day on the domestic calendar front.

The Greenback rose from a three-week low on Wednesday, as investors grew cautious about the continuing U.S. trade talks with China. Overnight US Trade Representative Robert Lighthizer said that much still needs to be done to reach an agreement with China. Yesterday on the release front we saw a 4.6% monthly advance in Pending Home Sales, offsetting the poor housing figures released on Tuesday. Factory Orders, however, posted a modest 0.1% advance versus the 0.5% expected.

Looking ahead today and all eyes will be on the release of US preliminary Q4 GDP which is expected to print a 2.3% quarterly growth from a Q3 reading of 3.4%.

From a technical perspective, the Greenback is stronger this morning against the Australian dollar trading at 0.7135. We continue to expect support to hold on moves approaching 0.7120 while now any upward push will likely meet resistance around 0.7200. The New Zealand dollar also fell against the Greenback down 0.6 percent to 0.6846.

The Euro lost its gains yesterday to open against the United States Dollar at 1.1379 this morning. This struggle in its momentum can be attributed to the European Central Bank announcing that Italy’s debt was a threat to the EU. Additionally, regarding the ECB’s policy outlook, Bundesbank President Weidmann advised there was no reason to be overly pessimistic about the economic slowdown.

There is a sleuth of macroeconomic data scheduled to be released tomorrow that is expected to affect the EUR. These include the PMI data for Spain, Italy, France, and Germany. The Purchasing Managers Index shows the level of a diffusion index based on surveyed purchasing managers and is a leading indicator of economic health as purchasing managers hold current and relevant insight into the company’s view of the economy.

The Canadian Dollar gained ground against the Greenback yesterday early in the North American session, the USD/CAD rate moved 1.3176 down to 1.3118 as momentum in the pair was bearish during off-shore trade. However, the pair saw a bounce after data released by The Bank of Canada that the Consumer Price Index recorded a modest rise of 0.1% in January with the yearly rate and Bank of Canada’s core CPI decelerating sharply to 1.4% y/y and 1.5% y/y respectively. Currently, USD/Cad is changing hands at 1.3155

On the data front, today sees Current Account figures released by Statistics Canada. The global trade war and lower oil prices continue to weigh on Canadian exports, and the current account continues to rack up deficits. Still, the deficit in Q3 dropped significantly to C$10.3 billion, beating expectations. However, the deficit is expected to jump to C$14.0 in Q4. Also, The Raw Materials Price Index is due for release which rebounded in December, with a gain of 3.8%. The markets are expecting another strong gain in January, with an estimate of 4.1%.

On the technical front, support is at 1.3110 and 1.3050 level. Resistance is at 1.1370 level. .