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Australian Dollar touches ten-year lows

AUD - Australian Dollar

The Australian Dollar opens nearly 2% weaker from this time last Monday, moving from highs of 0.6911 down to a low of 0.6763 witnessed on Friday during the European session. Causing these moves are largely based on imbalances between the RBA and the US Federal Reserve. The Fed cut rates last week but signalled that a series of further cuts were unlikely whereas on the other hand we have the RBA cutting rates to record lows and the governor recently mentioned an extended period of low interest rate would be required in an attempt to lift inflation. This has hasn’t been great for the Aussie, adding fuel to the fire the commodity dependant AUD is being caught in the crossfire of a global economic downturn if its largest trading partner, China, is also under fire.

On the data front, Friday saw the release of Australian Retail Sales which picked up from the month of June at 0.4%, beating expectation of a 0.3% rise. However, interestingly the annual growth rate in retail volume came in at just 0.2% which indicates growth over the last 12 months has been weaker than in the GFC and the weakest since the early-90s recession.

Looking ahead, locally we see low tier release of AiG Services Index and the MI Inflation Gauge. All eyes on the RBA who meet tomorrow, markets are pricing in a 91% chance of interest rates staying on hold. Adopting a technical viewpoint, Aussie is currently trading below the main daily simple moving average at 0.6792, we see initial support at 0.6759 before 0.6720 on the downside. On the topside, first lines of resistance are seen at a level of 0.6820 followed by 0.6870.

Key Movers

Last week equity markets around the world hit global highs in optimism that US-China trade talks were moving in a positive direction, this quickly changed direction after Trump tweeted that a 10% tariff would be imposed on $300 billion worth of Chinese goods on September 1st after US negotiators returned from Shanghai making zero progress. US nonfarm payrolls increased 164k in July on the heels of a downward-revised 193k increase in June and the unemployment rate came in at 3.7%.

The US Dollar is lower against both the Euro buying 1.1106 and the Japanese yen at 106.57. The GBP/USD closed the week around 1.2160, local data released saw UK Construction PMI at 45.3 for the month of July which was better than the previous month of 43.1 but still missing expectations of 46.0. GBP/USD has been limited on any upward moves as increased odds of a no-deal Brexit after Boris Johnson became Prime Minister.

Expected Ranges

AUD/USD: 0.6720 - 0.6820 ▼

GBP/AUD: 1.7650 - 1.8050 ▲

AUD/NZD: 1.3000 - 1.0440 ▼

AUD/EUR: 0.6080 - 0.6160 ▼

AUD/CAD: 0.8900 - 0.9000 ▼