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Last week recap
The Australian dollar was bolstered last week from a buoyant trade balance surplus in the month of September and seeing the Aussie rally to its largest one-day gain in over 12 months. Respite for the Aussie came after a month of sideways trading between 0.7025 and 0.7180. The catalyst for such movements came in the form of large short positions at its highest level in three years being unwound month end.
The AUD/USD opened on Friday morning at the US 72 cent handle for the first time in a month and hoping to continue its bullish momentum. Australian Retail Sales rose 0.2% for the month of September after food retailing (up 0.4%) spurred the figure higher. Despite the result being marginally weaker than the previous reading in August of 0.3%, The local currency held up well into the afternoon.
The dollar hit eventual highs on Friday evening of 72.58 US cents before giving up all gains into the North American session as the greenback came back into force following a bullish Non-Farm employment release. Employment rose by 250,000 jobs in October, well above expectations.
Closing just under support at the US 72 cent handle of 71.86 US cents, the Australian Dollar direction will be dependent on tomorrows Melbourne Cup day interest rate decision where it is expected the RBA will firmly keep interest rates on hold.
The Australian dollar opening this morning at 0.7195.
New Zealand Dollar
AUD / NZD
AUD / NZD Expected Range:
1.0730 – 1.0980
The New Zealand Dollar opens this morning similar to those levels of Friday’s Asian open around 0.6645. The NZD/USD pair initially rallied on Friday on the back of a Bloomberg report that Trump was looking to reach an agreement on trade with the Chinese President at the Group of 20 nations summit in Argentina this month and has asked key U.S. officials to begin drafting potential terms. The news pushed the pair up to 0.6689 and managed to hold around these levels until later in the North America Session where US Payrolls data highlighted strength in the labour market giving weight to expectations of further rate hikes from the Fed.
Looking ahead, today sees the release of ANZ Commodity Prices m/m and ANZ Job Advertisements m/m.
On the technical side, support sits at 0.6640 and 0.6600 and resistance up at around the 67c handle.
GBP / AUD
GBP / AUD Expected Range:
1.7830 – 1.8280
The Great British Pound oscillated throughout much of last week as Brexit headlines dominated market sentiment. The Sterling finally managed to break through the psychological level of 1.3000 after falling to an 11-week low of 1.2698 earlier in the week. Opening this morning at 1.3042, the Pound continues to trade on the back of Brexit news and headlines.
The Pound found the momentum to break-through 1.3000 after the headlines confirmed the UK and EU are closing in on a Brexit deal for Financial Services. Despite the language used by the two parties being widely different, the Sterling still moved almost 2% higher on the back of the news. The Bank of England’s Governor Carney also added to the dialogue repeatedly saying that a no-deal Brexit is not the most likely scenario. The Bank of England also slightly downgraded their short-term growth outlook while confirming their one rate a year outlook on the monetary policy front.
The other-side of the equation however tempered gains for the Sterling with US non-farm payroll report in particularly surprising to the upside. The large increase in monthly jobs gained cemented expectations of a December rate hike by the Federal Reserve and saw demand for the Greenback ratchet up a notch.
Moving into the start of a new week, the Great British Pound continues to monitor the Brexit negotiations for direction. PMI data is also set for release on Monday.
United States Dollar
AUD / USD
AUD / USD Expected Range:
0.7080 – 0.7230
On Friday the US. dollar was supported by local data that showed U.S. job growth rebounded sharply in October. US Nonfarm Payroll report indicated the US economy added 250K new jobs in October, surpassing the 190K expected, although the September headline was downwardly revised to 118K from the previous estimate of 134K. We also saw the release of US Employment Report which indicated the unemployment rate remained steady at 3.7%, while average hourly earnings were up 3.1% YoY, above 3.0% for the first time in over nine years.
On the data front this week there are no scheduled releases on Monday. However on Tuesday we will see the US Mid-term Elections with the markets likely to be fully priced in a gridlock in the run up to the elections. Also this week we will see the Federal Reserve’s Monetary Policy Statement on Thursday with the official cash rate expected to remain steady at 2.25 percent.
From a technical perspective, the US. dollar is currently stronger against the Japanese Yen 113.17 (up 0.51%) and Euro 1.1389 (up 0.2%). However the Greenback fell against the Aussie dollar (0.7191) and New Zealand dollar (0.6635) on Friday as worries that a trade deal between the United States and China may not be imminent.
AUD / EUR
AUD / EUR Expected Range:
0.6210 – 0.6380
The Euro edged marginally lower through trade on Friday drifting back toward key support and resistance handles. Having touched intraday lows at 1.1388 the Euro found support, flirting with moves at and around 1.14 creeping back above the short-term resistance marker to close at 1.1404.
The Euro has struggled to break outside restricted ranges throughout the last month, bouncing between 1.1350 and 1.1550. Political instability, questions surrounding Italy’s fiscal security and lackluster growth have forced the 19-nation combined unit lower, suppressing possible upside momentum. While forecaster see scope for an upward push toward the end of the year medium and longer-term direction will depend heavily on a positive Brexit outcome, an end to China/US trade tensions and a clear signal from the ECB the current QE program will end come December with interest rates to begin increasing come summer.
With little of note on the macroeconomic docket through Monday or the week ahead direction will be largely driven by broader flows and the all-important mid-term elections US midterm elections.
AUD / CAD
AUD / CAD Expected Range:
0.9250 – 0.9480
The Canadian Dollar edged lower against a stronger US dollar on Friday following softer than anticipated domestic labour market data. Despite a dip in the unemployment rate, softness across new jobs created and sluggish wage growth, coupled with a reduction in the balance of trade, forced the Loonie lower as the likelihood of a December rate hike diminishes.
Just 28% of analysts are pricing in a December rate adjustment now, a considerable disparity with that of the US wherein 72% of investors anticipate the Fed will tighten monetary policy. The contrast in jobs data Friday only forced this gap to widen further and will likely keep a cap on medium term CAD gains.
Attentions are now squarely affixed to the weeks big risk event, the US midterms. The outcome of these elections has the possibility to drastically reshape not just US domestic policy but the Trumps administrations ability to force change globally. Despite all the division between Trudeau and Trump and the ongoing trade debate a republican win should benefit the CAD.
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