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Australian Dollar retreats under 73c

By OFX

The Australian Dollar descended from two and a half month highs yesterday as fresh developments from over the weekend surfaced that the US and China trade conflict was not anywhere near close to being resolved. Apparently Chinese officials were unhappy over wording of the joint statement that is usually releases at the end of the APEX summit. The AUD/USD pair broke through psychological support of 0.7300 and touched a low of 0.7277 during the North America session.

Looking ahead, todays see the release of the monthly Monetary Policy Meeting Minute. The Reserve Bank of Australia left the interest rate unchanged in November at 1.50% since mid-2016. While the statement was mostly left unchanged as well, the meeting minutes could reveal further information about the central bank’s thinking. Comments on the labour market, the housing sector, and global trade could have an impact. We also have the RBA Governor Phillip Lowe speaking later this evening in Melbourne at the Committee for Economic Development of Australia Annual Dinner and will talk about “Trust and Prosperity.” Prosperity is clearly related to the economy and monetary policy. Any comments about the current economic situation in the land down under could impact the Aussie.

On the technical front, immediate support sits at 0.7280 followed by 0.7225. on the upside resistance is at 0.7325 and 0.7360.

Monday saw the Kiwi rise to 0.6873 in Sydney morning trade before retreating as markets digested US vice president Mike Pence’s comments directed at Chinese President Xi at the Asia-Pacific economic cooperation summit. The comments dampened risk sentiment and weighted on both the NZD and the AUD during the Australian and overnight sessions. This saw the NZD/USD close the Sydney session at 0.6850 before continuing its descent to 0.6817 then rebounding into this morning’s open where it is currently trading sideways around the 0.6837 handle.

The downward slide came despite stronger than expected second tier data releases. NZ PMI and PSI reads both bounced; PMI rising to 53.5 in October from 51.9 in September while PSI rose to 55.4 from 53.9. The moves were interesting, particularly given many market participants bearish outlook given the historically low signs of business confidence emanating from the domestic economy.

First off the bat this morning we have NZ dairy auctions, Kiwi traders will be looking for some price stability given may’s slippages. Moving across the pond we have the Board Minutes from the Reserve bank of Australia’s November meeting due out at 11:30am AEDT before RBA governor Phillip Lowe will deliver a speech called “trust and Prosperity” at 7:20pm. The minutes are not expected to deliver any surprises however markets will be closely watching Lowe’s speech for any clues regarding the central banks view on the economic outlook; of particular interest will be the banks views on recent labour market strength.

Looking ahead to the day ahead, we see key lines of NZD/USD technical support firstly at the session low of 0.6817 before the psychological 0.6800 handle. On the flipside, we expect topside moves to meet resistance approaching the 0.6884 handle.

The Great British Pound is slightly stronger this morning when valued against the Greenback. The Pound Sterling received a boost on Monday as Prime Minister Theresa May sought to win support for her draft European Union divorce deal which has come under attack from many in her ruling Conservative Party.

On the data front today we will see the Treasury Committee presenting the Inflation Report Hearing with comments from Bank of England’s Governor Mark Carney taking center stage. We will also see the release of the CBI Industrial Trends Survey-Orders for November.

From a technical perspective, the GBP/USD pair is currently trading at 1.2851. We continue to expect support to hold on moves approaching 1.2810 while now any upward push will likely meet resistance around 1.2850.

The United States Dollar marginally retreated against a basket of currencies in overnight trading, falling 0.22% to 96.22 to open the Asian session. It wasn’t an across the board affair however with the USD certainly appreciating against a number of China-aligned currencies.

The Greenback felt the effects of some familiar pressure points overnight with the US-China trade war continuing to add volatility to global markets. Ahead of the all important G20 meeting in Buenos Aries later this month, the US VP Mike Pence and President Xi weren’t afraid to ratchet up the rhetoric during the APEC summit, undermining market hopes of a reconciliation. Markets reeled at the news with key US equity index’s falling around 1.5% led by some notable tech stocks. Adding to the sell-off was the NAHB housing market index which had its worst drop in four years, further unsettling the market.

The Federal Reserve also added to the volatility with the New York Fed President John Williams speaking overnight and stressing that monetary policy wasn’t on a pre-set course. He commented that “we’ll adjust how we do monetary policy to do our best to keep the economy going strong with low inflation”. Williams statement, when added to Clarida, Kaplan and Harker’s recent comments seem to support the markets dovish interpretation and undermine the markets expectations of a December rate hike.

Tuesday is set to be another quiet day on the economic calendar with the market turning to the headlines for direction.

The Euro hit a fresh two-week high overnight as pressure continues to increase for the greenback following cautious comments from Federal Reserve officials. Movements 0.6% higher were seen from 1.1390 on open in Europe to intraday highs of 1.1462 as growth slowdown expectations hampered the dollar.

Despite broader appetite for the Euro, any upside movements subsided as negotiations between Rome and Brussels continue after a meeting of Eurozone finance ministers overnight. As talks continue, Italian Economy Minister Giovanni Tria said that Italy will stick with its 2019 budget plans despite it being rejected by the European commission as it fails to reduce its debt.

The release of September Euro area current account figures saw a surplus of €17 billion, contracting from Augusts reading of €24 billion, and expected to decline to 2.8% of GDP next year according to ECB projections.

The EUR/USD opens this morning at 1.1450 ahead of ECOFIN meetings

The Canadian dollar edged lower against its U.S. counterpart on Monday, straying close to the nearly four-month low touched last week, as oil prices slipped and global risk appetite remained in check. The USD/CAD pair reached an overnight low of 1.3141 (down 0.38 per cent).

On the local data front today there are no scheduled releases. The focus will turn to the domestic data releases at the end of the week.

From a technical perspective, the USD/CAD pair is currently trading at 1.3180. We continue to expect support to hold on moves approaching 1.3100 while now any upward push will likely meet resistance around 1.3200.