Home Daily Commentaries Australian Dollar tests support at US 75 cents

Australian Dollar tests support at US 75 cents

Daily Currency Update

Enjoying a more stable day when compared to the carnage which has been witnessed for much of the past week, the Australian dollar has been more settled over the past 24 hours. Doing well to navigate an intricate overnight session which included updated signals from the US Federal Reserve, policy makers showed that they remain in no rush to accelerate rate rises, despite the emergence of inflation from the world’s largest economy.

With the tide still very much favouring the US dollar, energies today will turn to Building Approvals as well as Trade Balance numbers from Australia as investors look to capture levels back up above the 75 US cents barrier. Having traded between a low of 0.7475 and a high of 0.7537 yesterday, the Australian dollar opens virtually unchanged versus its US Counterpart at a rate of 0.7490.

Key Movers

The New Zealand dollar saw further pressure over the last twenty four hours as mixed domestic data pushed the local currency to close underneath the 70 US cent handle for the first time this year. Opening the day above support levels, the Kiwi hung on to intraday gains after the NZ unemployment rate hit the lowest level in a decade at 4.4% in line with expectations. Total Jobs for the quarter grew by 15,000 jobs and 0.6% for the quarter.

The NZD/USD cross saw eventual highs of 0.7025 but could not hang onto any sustained rallies as investors sold off the Kiwi in droves as US Dollar strength continues to be the main drivers this week. Markets saw an overnight low of 0.6986 and the New Zealand Dollar opens this morning at 0.6995.

The Great British Pound remains the weakest currency across the board however found some relief overnight helped by an upbeat UK Construction PMI data, which recovered from March's slump into contraction territory, to print 52.5 in April, also above market's forecast of 50.5. The Sterling recovered from a fresh multi-month low against the Greenback of 1.3555 before reaching a high of 1.3665.

The GBP/USD pair is currently trading at 1.3575. We now expect support to hold on moves approaching 1.3580 while any upward push will likely meet resistance around 1.3660. Looking ahead today will see the release of the Market Services PMI this Thursday, expected at 53.5 from the previous 51.7.

The dollar managed to close higher for a third session in a row despite initially selling off after the FED left rates unchanged and apparently did little to warn the markets that a rate hike in June was imminent. It traded as much as 0.20% lower before recovering and climbing to session highs, up .30%.

Fed officials did acknowledge inflation is close to target, but the initial perception of the market was slightly dovish. From the data front, ADP Employment came slightly stronger than expected with a 204k rise (vs. 198k expected).

Attention will now be focused on the evolution of interest rates, specially Treasury yields, with the curve steepening a bit following a mild increase in the long-end part. Also, US Treasury Secretary Steven Mnuchin will be holding trade talks in Beijing with Chinese Vice Premier Liu He.

EURUSD fell almost 0.4% to trade close to a three-month low of 1.1938. It managed to trade above the important 1.20 level after the initial USD drop following the FOMC statement, reaching 1.2020.

Unemployment and GDP data came as expected but that didn’t help the Euro, which was probably also affected by weakness in some Eastern European currencies after the European Commission proposed fund cutting to bloc countries in their new budget

The 200-day moving averaged has moved up a little bit and now sits at 1.2015, which might act as next resistance level. The EURUSD is opening a tad stronger around 1.1960, bouncing from last session lows from around 1.1940, not so far from the year’s low of 1.1916.

The Canadian Dollar was also outperformed by the USD, down 0.20% and trading on a relatively tight range between 1.2804 and 1.2888 on the back of weaker oil prices.

USDCAD initially dropped around 40 pips to 1.2804 as the FED statement was initially interpreted as dovish. That level has been acting as good support for the USDCAD lately, and we will probably need broad USD weakness to break that figure. Despite the recent weakness, the loonie is trading near three-month highs versus the EUR.

Not much expected on the economic front this week.

Expected Ranges

  • AUD/NZD: 1.0680 - 1.0750 ▼
  • GBP/AUD: 1.8020 - 1.8200 ▼
  • AUD/USD: 0.7460 - 0.7550 ▼
  • AUD/EUR: 0.6220 - 0.6290 ▲
  • AUD/CAD: 0.9610 - 0.9690 ▲