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Aussie dollar range-bound ahead of September trade balance figures

By OFX

The Australian dollar reached a 24-hour high of 0.7106 yesterday before settling around 0.7080. The Greenback strengthened against most major rivals overnight ending the day with an upbeat tone across the board.

On the data front yesterday, Consumer Price Index (CPI) rose 0.4 per cent in the September quarter 2018, according to the latest Australian Bureau of Statistics (ABS) figures. This follows a rise of 0.4 per cent in the June quarter 2018. Looking ahead today and we will release of QE Import and Export prices indexes, alongside with September trade balance data.

From a technical perspective, the AUD/USD pair is currently trading at 0.7075. We continue to expect support to hold on moves approaching 0.7040 while now any upward push will likely meet resistance around 0.7090.

The New Zealand Dollar is little changed this morning when valued against the U.S. Dollar. The Greenback has continued to push higher overnight helped by better than expected US data. ADP survey showed that the private sector added 227K new jobs in October, largely surpassing the 189K expected.

On the data front yesterday seasonally, adjusted number of new dwellings fell 1.5 percent compared with August 2018, following a 6.8 percent rise in August, and a 9.7 percent fall in July. There are no scheduled releases for today.

From a technical perspective, the NZD/USD pair is currently trading at 0.6515. We continue to expect support to hold on moves approaching 0.6500 while now any upward push will likely meet resistance around 0.6560.

A massive night for the Sterling on Wednesday, initially bouncing nearly 1% against the greenback after 2 weeks of declines. The move saw the pound surge from 1.2700 to 1.2830 after Britain’s Brexit Secretary announced a divorce deal could be agreed upon with the European Union by the end of November. The news of an imminent deal saw the pound rally strongly, also pushing EUR/GBP lower from 0.8938 to 0.8845 before recovering slightly to finish 0.7% up.

Previous weeks had seen the Pound weaken around 4% as investors were cautious amid the lack of progress in the Brexit talks as the deadline draws nearer. With a deal now looking likely, traders will now turn their attention to tonight’s Bank of England monetary policy meeting, with some expecting a more hawkish approach from the central bank.

Given the overnight moves, new lines of GBP/USD technical support are evident at 1.2750 and 1.2700 with topside moves expected to meet resistance at the 2018 low of 1.2921.

The US Dollar continued its advance against most major currencies through trade on Wednesday buoyed but a surge in Private sector payrolls and Treasury yields. The dollar index, a measure of the Greenback against it six closest rivals, pushed through 91.10 to touch intraday highs at 97.167. Investors’ appetite for Treasury yield gains drove the dollar higher while, private sector employment increased at its fastest pace in 8 months, suggesting there is still fuel left in the labour market engine despite some calls the US economy is running close to full employment.

Yesterday’s ADP non-farm payroll print suggests Friday’s headline labour market data release should print at least on or above current expectations fueling calls the extended long run business cycle will continue. US macroeconomic data continues to support Tighter monetary policy and the Fed’s path to policy normalization. This burgeoning gap in interest rates is powering Greenback strength and despite near term risks should at the very least backstop the dollar into 2019.

Attentions now turn to Manufacturing data and Construction Spending as headline markers ahead of tomorrow’s Employment change and wage growth prints.

The Euro opens weaker this morning touching fresh 2018 lows at the hands of an appreciating US Dollar. The EUR/USD descended towards 1.1302 a level not witnessed since June 2018 thanks mainly to a weaker than expected Retail Sales figures in Germany and bullish US Jobs data. German Retail Sales rose by 0.1 per cent, compared to the previous month and lower than anticipated showing a strain in Europe’s biggest economy. On a year on year basis, turnover in Germany’s retail trade dropped by 2.6 per cent, below analyst expectations of 0.9 per cent growth.

Looking ahead we see the release of German import process and Eurozone Manufacturing PMI.

The main trend is still looking bearish with support sitting at 1.1300 and 1.1200, with resistance up at 1.1350 followed by 1.1400

The Canadian dollar continued to suffer at the hands of a stronger US dollar edging lower despite a stronger than expected monthly GDP print. The domestic economy expanded throughout August, growing one tenth of a percent, while industrial price pressures also climbed opening the door for an uptick in broader CPI upside and another Bank of Canada rate adjustment.

Despite reasonable domestic economic performance, the Canadian dollar has failed to keep pace with the worlds base currency. The Fed’s march to tighter monetary policy has fostered ongoing USD outperformance while persistent softness in oil prices has dampened demand for Loonie.

With little of note on hand today our attentions turn to Fridays employment print as the primary markers driving direction through the end of the week.