Daily Currency Update

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Plunging oil prices force AUD off resistance at 0.64.

AUD - Australian Dollar

The AUD offered little to excite investors through trade on Monday maintaining a relatively modest 60-point range. Improvements in demand for risk were offset by a plunge in oil prices as West Texas crude futures for May moved into negative territory. Risk sentiment found support on reports New Zealand will begin easing containment restrictions on April 29th; Germany has allowed smaller retail shops to open and plans to send students back to school in May and the number of daily fatalities in the US and UK continue to fall. The AUD crept higher touching 0.6395 on two occasions however, failed to extend beyond resistance at 0.64. The plunge in oil prices then forced a sharp but short sell off moving into this morning’s open and the AUD currently buys 0.6332 US cents.

Attentions turn to commentary from RBA governor Philip Lowe this afternoon. Lowe is set to provide an update on Economic and Financial Stability with investors keenly attuned to any commentary surrounding monetary policy instruments. The RBA has previously suggested it will look to scale back the size and pace of bond purchases, a relatively hawkish stance in the current environment. While we expect messaging will be largely unchanged, affirmation the central bank is looking to slow use of monetary policy in the near term could help fuel short term AUD upside.

Key Movers

The US dollar crept higher through trade on Monday, up 0.4% when compared with a basket of major counterparts, as oil prices tumbled and the Euro remained range bound ahead of a key EU summit this week. West Texas crude prices plunged lower as a lack of demand, a shortage of storage capacity and glut of supply forced a swift correction in short term future values. May Futures fell to minus $40 a barrel meaning sellers were willing to pay buyers to take the oil off their hands. The sharp correction appears to be caused by technical factors linked to capacity and storage issues in the near term thus limiting contagion into other financial instruments. That said, the correction in oil forced the CAD and NOK lower with both units underperforming through the day, down 0.8% and 1% respectively.

Attentions now turn to the EU as leaders meet via video hook up on Thursday to extend discussions on how to deal with the economic fallout of COVID19. French President Emanuel Macron has backed plans for a specialised issuance of coronabonds in a bid to support embattled southern EU economies, like Italy. The plan has been met with strong opposition from Germany and Netherlands with both countries reluctant to issue blank cheques and effectively force their own taxpayers to bail out other EU member countries. With the EU divided the combined unit will likely come under increasing pressure through the short term.

Expected Ranges

AUD/USD: 0.6180 - 0.6420 ▼

AUD/EUR: 0.5750 - 0.5880 ▼

GBP/AUD: 1.9290 - 1.9820 ▼

AUD/NZD: 1.0380 - 1.0550 ▼

AUD/CAD: 0.8880 - 0.9020 ▲