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Australian dollar advances following biggest trade surplus on record

AUD - Australian Dollar

The Australian Dollar rallied on Wednesday morning following positive leads from the release of both domestic Retail Sales and Trade Balance figures. Opening at 0.7070 against the US Dollar, the AUD rallied to an intraday high and a test of resistance levels at 0.7105.

Gains for the local currency were seen from a boost in Retail Sales for the month of February as nominal retail sales grew by 0.8% following a small rise in the previous month of 0.1%. Retail sales growth grew 3.2% on a y/y basis. There was an immediate rally in the AUD/USD of forty-five basis points following the strongest trade surplus on record fuelling movements higher. The surplus of $4.8bn in February was mainly due to a lift in commodity prices and large boost in Iron Ore exports.

Overnight highs were seen at 0.7130 before drifting lower during the North American session. From a technical perspective, the AUD/USD pair is currently trading at 0.7112. We continue to expect support to hold on moves approaching 0.7090 while now any upward push will likely meet resistance around 0.7150.

Key Movers

The Great British Pound moved lower with some macroeconomic news to report on for a change. A weaker than expected Services PMI reading of 48.9 saw the GBP/USD test support levels at the phycological mark at the 1.30 handle. Cable then recovered ground to 1.3150 and finish higher for the day as PM Theresa May outlined her alternative approach to Brexit. Further delays are expected to be seen as May looks to come to a workable agreement with the Labour party to win a majority in the commons.

News overnight in China has been positive towards finalising a trade agreement between the United States and China as the South China Morning Post reports that trade talks are 90% concluded with the hope of finalising a deal in the next week. Further meetings continue today in Washington with the news sparking the US Dollar higher. The DXY at one stage reached 97.50 and three-week highs.

On the agenda today is the release of ECB Monetary Policy Meeting Accounts as investors look for any clues as to whether there is expected to be additional measures to stimulate the economy following the ECB’s announcement at its latest meeting to start its third long term refinancing operation (TLRO).

Expected Ranges

AUD/USD: 0.7050 - 0.7150 ▲

AUD/EUR: 0.6300 - 0.6400 ▲

AUD/NZD: 1.0450 - 1.0550 ▲

GBP/AUD: 1.8300 - 1.8700 ▼

AUD/CAD: 0.9400 - 0.9550 ▲