Australian dollar holds following a dip below 70.50 US cents
Monday 29 October, 2018
Daily Currency UpdateThe Australian Dollar was put under pressure on Friday to see multi year lows after crumbling below critical support levels of 0.7050. After opening at 0.7080 against the Greenback, the Aussie saw steady movements lower through the Asian trade following speculation that the People’s Bank of China had intervened in currency markets to support the Yuan. China is apparently prepared to use as much currency reserves as possible to ensure the Yuan does not fall through 7 yuan per dollar.
At the close of the local session, intraday lows hit 0.7025 in a risk off environment as equities continues to suffer losses in both Australia and abroad.
The United States Advanced GDP release pulled back to 3.5 percent in the third quarter from the previous reading of 4.2% , with markets disappointed by poor business investment levels to see the Greenback sold off by week end.
This pulled the Aussie higher from 0.7030 to close the week again just below the US 71 cent handle. This week looks to be busy on the economic agenda with a focus on the release of Inflation figures domestically for the third quarter of 2018.
This morning sees the release of HIA New Home Sales for the month as the Australian Dollar opens this morning at 0.7093.
Key MoversThe New Zealand Dollar is stronger this morning when valued against the U.S. Dollar on the back of US Q3 GDP data report which focused on the poor reading for business investment raising some doubt about the sustainability of growth moving forward. US Q3 GDP for the three months to September came in at 3.5%, above the 3.3% expected.
On the data front this week in New Zealand it is very quiet with the only two releases scheduled Building Consents on Tuesday and ANZ Business Confidence on Friday. There are no scheduled releases in New Zealand today.
From a technical perspective, the EUR/USD pair is currently trading at 0.6522. We continue to expect support to hold on moves approaching 0.6501 while now any upward push will likely meet resistance around 0.6582.
Ongoing concerns surrounding the possibility of a no Brexit deal continue to weigh on the pound with the domestic unit remaining under downward pressure last week. GBP/USD opens roughly flat this morning hovering around the 1.2820 level heading into a week which delivers a number of key risk events for the pound. We have a UK budget release due out on Monday, followed by the Bank of England meeting and inflation report for November on Thursday. Despite this, there is no hiding from the Brexit situation, with broader risk sentiment and Brexit headlines likely to continue to dominate price action for the pound.
Focusing on Monday’s budget releases, markets will be eager to understand whether Prime Minister Theresa May’s promise of ‘an end to austerity’ and her commitments to meeting existing fiscal targets are still attainable in light of the Brexit uncertainties. Thursday’s BOE meeting is also likely to see the monetary policy committee retain their ‘gradual and limit’ rhetoric by keeping a hold on the cash rate however it will be interesting to see how the contradicting macroeconomic signals emanating from the domestic economy will; be interpreted by the central bank. A rate hike is generally not expected before May 2019.
We’re expecting the GBP/USD pair to trade between 1.2650 and 1.2960 throughout the next week, however we do see key technical resistance at 1.2865 on the topside, whilst on the downside immediate support is evident at levels nearer to 1.2810 followed by 1.2775.
The US dollar enjoyed mixed fortunes through trade on Friday giving up two-month highs on increasing concerns US earnings are beginning to show signs the protracted long run cycle is coming to an end. The Dollar found support early following a stronger than anticipated GDP print. An uptick in consumer spending and inventory investment offset the drop-in tariff plagued exports, ensuring the slowdown in growth was not nearly as dramatic as first anticipated. Despite the strong headline GDP print and a slow down in inflation that may give the Fed reason to pause its rate hiking cycle the Dollar fell across the board into the close.
Investors were reluctant to extend the recent upside as the adverse effects of tariffs on US earning, increasing borrowing costs and political tensions are beginning to weigh on broader optimism. The Dollar index fell almost six tenths of a percent, while the Euro pushed through 1.14 and the Yen made early gains as risk appetite waned.
Attentions now turn to a slew of macroeconomic indicators headlined by Tuesday’s Consumer confidence report and Fridays Non-Farm payroll print.
The Euro had what seemed to be a bumpy ride on Friday against the Greenback. Having initially opened Friday’s Asian session around the 1.1374 area, the pair moved sideways until the European session began where the pair was dragged lower following European Central Bank President Mario Draghi's failure to convince traders the ECB could pursue monetary tightening after next summer as political and economic uncertainties grow in the monetary union. Technical buyers came in to stop the price slide as the pair bounced off 1.1335 August 15 support levels. A slow grind back over 1.14 on the back of weak US Data and the Euro closed the week a shade higher at 1.1403 against the U.S Dollar.
In economic news, German GfK Consumer Climate released showed that consumers in Germany remain in a spending mood in spite of a recent dampening of the country's macro-economic prospects. The consumer climate indicator forecasts the development of real private consumption in the following month with the barometer holding steady at 10.6 for November.
Looking ahead, the local calendar is light until tomorrow where the Euro zone is to publish preliminary GDP data and Germany is to release data on consumer price inflation.
The USD/CAD pulled back from its highest level since September the 11th following a disappointing GDP reading out of the United States for the third quarter. Intraday highs hit 1.3160 before strength in the Loonie was seen during North American sessions and traded as low as 1.3080 at one point.
WTI Crude Oil prices pulled off lows to over $67 a barrel in further support for the Commodity based currency, and is hoping the Loonie trades higher off the back of Bank of Canadas rate hike last week from 1.5% to 1.75% and the fifth hike since July 2017.
From a technical perspective, the USD/CAD pair is currently trading at 1.3095. We continue to expect support to hold on moves approaching 1.3020 while now any upward push will likely meet resistance around 1.3150.
- AUD/NZD: 1.0780 - 1.0980 ▲
- GBP/AUD: 1.7975 - 1.8440 ▼
- AUD/USD: 0.7030 - 0.7150 ▼
- AUD/EUR: 0.6130 - 0.6280 ▲
- AUD/CAD: 0.9180 - 0.9380 ▲