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AUD pairs losses as greenback falters overnight

AUD - Australian Dollar

The Australian dollar was again under pressure during the Asian trading session as a lack of concrete information around a partial trade deal between United States and China filtered through to global markets. Opening Wednesday morning at 0.6757, intraday lows of 0.6725 were seen as uncertainty as to actual agricultural purchases by China and the agreed returns by the United States remain unclear.

MI Leading index, which measures nine economic indicators by the Melbourne Institute, came in at -0.1% with the main factors in the headline number include a deterioration in consumer sentiment and commodity prices.

Despite overnight lows reaching 0.6723, the AUD/USD cross paired all losses following disappointing retail sales in the United States causing a drop in the greenback.

The Australian dollar is currently trading at 0.6758. We expect support levels to hold on moves approaching 0.6720, while any upward push will likely meet resistance at 68 US cents.

Key Movers

The US dollar saw a deterioration overnight as Retail Sales saw its first drop in seven months. A reading of -0.3% for the month of September grossly missed market expectations of an increase of 0.3% as interest rate cuts in the United States have yet filtered through to consumer spending.

Should economic indicators continue to show weakness you would expect the Federal Reserve to cut rates for a third consecutive meeting on October 30th. Markets quickly increased their expectations of a 25bps cut following the Retail Sales release from 73.8% to 87.1% based on the CME Fedwatch Tool. The US Dollar Index (DXY) which measures the greenback against a basket of currencies closed 0.3% lower to test the 98.00.

Cable continued its rally overnight in hopes of a Brexit deal as talks between UK and EU officials resumed in Brussels. With the deadline of October 31 quickly approaching, the Great British Pound saw heightened volatility not seen since the 2016 June referendum. GBP/USD hit a five-month high overnight of 1.2877 with markets hanging onto any news as negotiators enter into their final days of talks.

Today we see employment figures due for release this morning in Australia and UK Retail Sales is likely to get some attention this evening. Brexit discussions continue to be the main theme at this weeks EU summit.

Expected Ranges

AUD/USD: 0.6720 - 0.6800 ▲

GBP/AUD: 1.8700 - 1.9200 ▲

AUD/NZD: 1.0690 - 1.0800 ▲

AUD/EUR: 0.6060 - 0.6140 ▼

AUD/CAD: 0.8880 - 0.9000 ▲