AUD - Australian Dollar
The Australian dollar benefited from broad based USD weakness overnight, with the US dollar index falling 0.6%, the AUD was able to rise over 60 pips from 0.6860 to 0.6920. The tight correlation between the AUD and global equity markets was once again evident as the S&P500 rose 0.7% on the day, whilst the NASDAQ100 also rose 1.2%, posting a record close in the process. AUD/NZD initially fell to 1.0630 as the Kiwi performed strongly however it did recover back to levels nearer to 1.0664.
On the domestic docket today, we have second tier data in the form of preliminary merchandise trade data for the month of May. Market participants don’t take much notice of the release as the data is not seasonally adjusted; it is therefore not expected to move markets. On the global front, we have a raft of PMI’s out of Japan, Germany, America and the Eurozone as well as industrial production numbers out of Taiwan. Further contractions are universally predicted across these releases.
Having bounced off lows of 0.6811 on Monday to now trade above 0.6900, traders will want to see a consolidation above this handle before moves to 0.7000 will be considered. On the downside, initial support is now seen at previous resistance level 0.6890 with a break below this opening up moves to 0.6840 (21 day moving average).
As we touched on above, we witnessed a reversal in risk sentiment throughout Monday trade which saw the USD sold off and risk assets such as equities and risky currencies rally. The reversal in risk sentiment also extended to commodity markets as oil, copper and gold all posted strong gains. These moves were seen as a sign of confidence from investors that the global recovery has begun and demand for these commodities will rebound.
Consistent with the shift in risk sentiment, the safe haven Japanese Yen underperformed, particularly in the crosses however the USD weakness saw USD/JPY trade sideways around the 107 handle. EUR/USD posted strong gains to trade around 1.1250 whilst a similar story was seen for GBP/USD, which closed the session near its daily high of 1.2460.
Global markets will now turn to the raft of PMI releases due out today which we outlined above. To finish out the week, investors will be looking to the RBNZ’s monetary policy decision on Wednesday before US GDP and employment figures on Thursday for direction.
0.6810 - 0.7000 ▲AUD/EUR:
0.6095 - 0.6150 ▲GBP/AUD:
1.7950 - 1.8120 ▼AUD/NZD:
1.0630 - 1.0700 ▼AUD/CAD:
0.9280 - 0.9360 ▲