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Australian dollar stalls at 70 US cent resistance levels
AUD - Australian Dollar
The Australian Dollar continued its advance on Wednesday afternoon, capitalising on US Dollar weakness following speculation that the Federal Reserve is going to unwind interest rate rises from 2018. Opening the morning at 0.6991, the Aussie saw a slight dip to 0.6980 following the release of Q1 GDP figures, with the Australian economy growing by 0.4% versus expectations of 0.5%.
Continuing to knock on psychological resistance levels of 70 US cents yesterday afternoon, the Aussie was not able to break through in overnight movements following a reversal in fortunes for the greenback as the AUD/USD declined to overnight lows of 0.6962. Following the RBA’s decision to cut rates on Tuesday to record lows of 1.25%, markets are now pricing in a 85% chance of another 25-basis point cut in August.
From a technical perspective, the AUD/USD pair is currently trading at 0.6968. We continue to expect support to hold on moves approaching 0.6900 while now any upward push will likely meet resistance at 70 US cents.
Key Movers
Bullish momentum for the US Dollar stalled overnight as ADP Non-Farm Employment numbers came in at a dismal 27,000 jobs added from April to May. This month’s print was well short of expectations of 189,000 jobs. Pressure mounts on the Federal Reserve to start cutting rates with markets pricing a 75% chance of a cut in July. The US Dollar Index (DXY) has fallen from 2019 highs last Friday of 98.28 to overnight lows of 96.75.
Gains were seen to 97.20 in North American markets following a positive ISD Non-Manufacturing PMI release showing the non-manufacturing sector grew in May to 56.9 vs 55.5 in April. The World Bank also put further fear into the global economy as GDP forecasts were cut from 2.9% to 2.6% with the IMF warning of a 0.5% cut to its 2020 forecast of 3.6%
Attentions now turn to this evening's ECB interest rate decision where it is expected the main finance rate will remain at 0%. ECB President Mario Draghi is widely expected to maintain his dovish stance with inflation currently well below target levels. Traders were pre-positioning themselves on Wednesday after pulling off from EUR/USD 1.1310 highs overnight to open this morning at 1.1230.
Expected Ranges
AUD/USD: 0.6900 - 0.7010 ▼AUD/EUR: 0.6150 - 0.6250 ▼
AUD/NZD: 1.0450 - 1.0580 ▼
GBP/AUD: 1.8000 - 1.8500 ▲
AUD/CAD: 0.9300 - 0.9400 ▼