Aussie sits marginally above key supports; are we poised for a break?
Monday 4 March, 2019
Daily Currency UpdateThe Australian dollar remained range-bound for much of Tuesday, bouncing about a 30 point range having tested key supports nearing 0.7050. Softer than expected Q4 exports and a dip in Chinese services data forced the AUD to touch intraday lows at 0.7062 before popping back toward 0.71 and touching highs at 0.7081. Regional risk appetite and equity mood remained soft as Chinese growth concerns and emendations to GDP forecast ensured the AUD remained vulnerable to a deeper downside correction.
Having shifted toward the lower end of recent ranges the AUD sits marginally above crucial medium term supports at 0.7050 as attentions turn to key domestic data sets today as possible markers for a break. Commentary form RBA governor Lowe and Q4 GDP data are key in governing longer range RBA expectations, softness across national accounts data could prompt investors to increase bets for a Reserve Bank rate cut and drive the AUD toward the psychological 0.70 handle.
With global growth concerns continuing to weigh on our domestic unit we expect the AUD will suffer at the hands of a broader bearish bias through the medium term.
Key MoversThe New Zealand dollar is slightly weaker this morning when valued against the Greenback as unexpectedly strong data on U.S. services industries and new home sales allayed some worries about the state of the world’s largest economy. Yesterday the kiwi dollar consistently tracked under the 0.68 mark.
On the release front yesterday the Global Dairy Trade which moved higher for the seventh straight time, led by a rally in whole milk powder. The GDT price index climbed 3.3 per cent from the previous auction two weeks ago. The average price was US$3,309 a tonne, compared with US$3,271 a tonne two weeks ago. Some 23,930 tonnes of product was sold, down from 25,324 tonnes two weeks ago. Whole milk powder jumped 6 per cent to US$3,186 a tonne.
From a technical perspective, the NZD/USD pair is currently trading at 0.6796. We continue to expect support to hold on moves approaching 0.6760 while now any upward push will likely meet resistance around 0.6830.
The Great British Pound is still facing uncertainty with the Brexit deadline looming. It did take a tumble during yesterday’s trading sessions against the United States Dollar on the back of better than expected US PMI data. A small uptick in the currency due to Bank of England’s Government Carney talk allowed the Pound to open at 1.3177 against the USD this morning.
Further talks from the Bank of England’s Monetary Policy Committee are scheduled for the rest of the week. The Committee members vote on where to set the nation’s key interest rates, and their public engagements are often used to drop subtle clues regarding future monetary policy.
The Dollar advance continued through Tuesday marking a 5th consecutive daily advance and two week high as an uptick in domestic data sets drove demand for the world’s base currency. Stronger than anticipated new home sales and service industry data help assuage fears the US economy is running out of steam, while concerns the European Central Bank would waylay interest rate hikes hampered the Euro. The uptick in US data sets coupled with an embattled broader European economy has highlighted the gap in central bank policy platforms and while the Fed has shifted to a more patient bias suggestions the ECB will relaunch quantitative easing measures has help funnel demand toward the higher yielding US dollar.
Having broken 97 the dollar index touched intraday highs at 97.008 before edging marginally lower. The Dollar appear well supported at this handle and sustained strength across macroeconomic indicators will only fuel demand as the US yield advantage widens.
With little of note on the domestic docket today attentions turn to Prelim Non-farm payroll data as a possible marker for Friday’s headline print.
The Euro continued its slide overnight after opening Tuesday morning at 1.1340 and saw a 0.3% decline on the day. A number of positive PMI readings from both Spain and Italy was not enough to spur the single currency unit higher. A pullback on the EUR/USD cross was seen as the greenback gathered momentum, aided by a stronger than expected USD non-manufacturing index release.
There was a brief rally during the European session back to intraday highs of 1.1340 as Retail Sales for the Eurozone in the month of January increased by 1.3% in seasonally adjusted figures. As positive news swung back in favour of the greenback, lows were eventually seen at 1.1290
From a technical perspective, the EUR/USD pair is currently trading at 1.1307. We continue to expect support to hold on moves approaching 1.1250 while now any upward push will likely meet resistance around 1.1400.
The Canadian Dollar slipped further overnight as US data surprised to the upside and undermined the Loonie. Opening this morning at 1.3355 against the Greenback, the Canadian continued the trend last week and was whittled lower.
The main news overnight came from the United States which saw the non-manufacturing ISM index rebound significantly. The Greenback responded positively to the news, appreciating 0.3% against all its counterparts although still trading within its well-trodden range of the last few months.
As far as domestics go, the market had little to trade on and appears to be holding out for a much more eventful Wednesday. Canada is set to release their Trade Balance data and the Bank of Canada is scheduled to release their overnight rate which is expected to remain unchanged.
- AUD/NZD: 1.0350 - 1.0530 ▲
- GBP/AUD: 1.8250 - 1.8850 ▲
- AUD/USD: 0.7030 - 0.7170 ▼
- AUD/EUR: 0.6220 - 0.6340 ▲
- AUD/CAD: 0.9330 - 0.9520 ▲