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Aussie marches on as Chinese trade data provides some optimism

AUD - Australian Dollar

The upward trajectory of the Australian Dollar continued through trade on Tuesday extending gains above 0.64 as sustained improvements in risk appetite helped drive the relied rally. Better than anticipated Chinese Trade Balance data helped fuel optimism the post coronavirus landscape may not be as dire as first feared. Exports fell 6.6% year-on-year, well up on forecasts that priced in 14% depreciation, while imports remained largely unchanged dipping just 1%. The strong read enable investors to largely ignore a sharp drop in oil prices and saw the AUD test 0.6450, touching intraday highs at 0.6444. While the print provides hope of a swift rebound a closer look at the numbers could suggest a false dawn. Production through March did indeed increase, however the uptick was largely driven by production of older orders delayed during the peak of the virus outbreak in China. New orders are expected to slow significantly in the months ahead as external demand deteriorates. Orders from key trading partners are already being cancelled and manufacturing activity has stalled through the first two weeks of April. We expect data to correct in the months ahead, offering a more accurate reflection of economic health and weighing on AUD optimism.

The AUD has enjoyed a strong relief rally as investors look past economic indicators. Risk continues to drive direction, opening the door to further upside as investors unwind positions following March’s liquidity crunch. We expect the AUD will remain well bid if risk remains the primary driver and optimism across financial markets continues to improve. If attentions shift back to macroeconomic indicators and the dire economic forecasts are even partly realised we could see the AUD correct back toward and below 0.60.

Watch resistance on moves approaching 0.6450/0.65.

Key Movers

The US dollar fell through trade on Tuesday as markets extended the recent risk on move. The dollar has come under sustained pressure throughout the last fortnight as liquidity pressures ease and a softening bias steers direction. The Dollar index fell five tents of a percent, dipping below 0.99 as the Euro pushed back through 1.09 and again tested 1.10.
A sharp decline in oil prices forced commodity currencies lower. Brent Crude fell 9% as production quarrels between OPEC and non-OPEC countries continues, with Saudi Arabia promising to maintain its high level of production through April. The dip in oil prices forced the Canadian Dollar and Norwegian Kroner lower.

Attentions today turn to US core retail sales as a key marker in identifying the economic impacts of the coronavirus.

Expected Ranges

AUD/USD: 0.6180 - .6530 ▲

AUD/EUR: 0.5680 - 0.5930 ▲

GBP/AUD: 1.9320 - 1.9880 ▲

AUD/NZD: 1.0380 - 1.0630 ▲

AUD/CAD: 0.8830 - 0.8980 ▲