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Aussie dollar supported by a soft US inflation report

Daily Currency Update

The Australian dollar is slightly stronger when valued against the Greenback for a third consecutive day on the back of improvement in risk appetite and a soft US inflation report.

On the release front yesterday NAB Business Confidence declined in February to its lowest in three years, printing 2 vs. the previous 4. Business Conditions declined to 4 after printing 7 in January. Also, Home Loans declined by 2.6% while the Investment Lending for Homes printed -4.1% in the same month. Looking ahead today and we will see Westpac Consumer Sentiment release at 10.30am AEDT.

From a technical perspective, the AUD/USD pair is currently trading at 0.7080. We continue to expect support to hold on moves approaching 0.7030 while now any upward push will likely meet resistance around 0.7100.

Key Movers

The Kiwi was once again the best performing currency on Tuesday as the Greenback and Sterling were both sold off. NZD/USD continued its gains to 0.6873 with the AUD/NZD cross extending its recent losses to touch 1.0311, representing its lowest level since September 2016. The Kiwi strength can be attributed to USD and GBP weakness accompanied by firmer risk sentiment on the day.

Looking ahead to today’s session, we have food price data out of the domestic economy at 10.45am NZ time before attention turns offshore to Australian consumer confidence for March which is due at 12.30pm NZ time. We also have industrial production data for January due out of the Eurozone and US durable goods orders data due out of the world’s largest economy.

We could see NZD/USD test 0.6900 today if USD weakness continues and risk sentiment remains favorable however we do see first lines of resistance at the 0.6880 region. On the downside the pair looks relatively well protected at the key psychological handle of 0.6800.

The Pound rose sharply on Tuesday as lawmakers prepared to vote on a divorce deal after Prime Minister Theresa May won last-minute assurances from the European Union. The UK Parliament overnight rejected Prime Minister Theresa May deal by 391-242 votes, giving the Pound a modest boost, as it opens doors for an extension. The Pound advanced above 1.3100 after the vote.

If lawmakers reject a ‘no deal’ exit on Wednesday, another vote would then be held on Thursday on whether Britain should request from the EU a limited extension of the March 29 Brexit date.

From a technical perspective, the GBP/USD pair is currently trading at 1.3072. We continue to expect support to hold on moves approaching 1.3050 while now any upward push will likely meet resistance around 1.3120.

The US Dollar Index (DXY) turned on its heels overnight and retreated from two-year highs as softer than expected inflation data for the world’s biggest economy put pressure on the Greenback. Opening at 97.20 on Tuesday morning, the DXY which measures a basket of currencies against the US dollar saw an intraday low of 96.86 as the release of core inflation figures (0.1%) for the month of February missed expectations of 0.2%, and at an annualised pace of 2.1%.

It is likely that the latest figure will be enough to put the Federal Reserve firmly on path for its change to a more neutral bias for interest rate setting as Inflation is expected to remain on trend at 2%.

The US dollar is expected to be driven today by the release of Core Durable Goods Orders and PPI figures as the DXY opens this morning at 97.00.

Markets looks to have fully priced in last week’s ECB dovish outlook as the EUR/USD advanced in overnight movements. Opening the morning at 1.1245, it was a steady upwards trajectory to test the 1.1300 handle as the weakening of the Greenback was seen as core CPI figures for the month of February slightly missed expectations.

The House of Commons ‘no deal’ Brexit vote by UK Prime Minister May was rejected this evening in the UK, suffering another large loss by 149 and another vote on Wednesday. EUR/GBP paired all losses from Monday’s price action after seeing an initial weekly low of 0.8490 before investors shifted back into the EUR and opens this morning at 0.8630.

The EUR/USD opens this morning in a more positive light at 1.1290 with a number of macroeconomic data sets due for release in the United States this evening along with EU industrial production figures.

Tuesday’s USD weakness allowed the CAD to strengthen to near one-week highs against the Greenback. Weaker than expected inflation data out of the world’s biggest economy weighed on the USD as the Loonie also got a boost from rising oil prices. The rise in oil prices was resultant of signs of supply side tightening as a Saudi official declared the country kingdom would cut its oil exports in April.

With not much on the data docket for today, the CAD will continue to take its cues from oil price direction and possibly further fallout from the unfolding Brexit situation.

CAD traded 0.25% higher with USD/CAD touching 1.3362. We see the pair being relatively well supported at 1.3288 in the near term, however a break below this could drag the pair to levels nearer to 1.3267. On the topside we are watching 1.3413 as a key level of resistance.

Expected Ranges

  • AUD/NZD: 1.0250 - 1.0350 ▼
  • GBP/AUD: 1.8200 - 1.8700 ▼
  • AUD/USD: 0.7020 - 0.7120 ▼
  • AUD/EUR: 0.6200 - 0.6300 ▼
  • AUD/CAD: 0.9400 - 0.9500 ▼