AUD struggles to break higher despite USD slowdown
Monday 18 March, 2019
Daily Currency UpdateThe Australian dollar edged higher through trade on Friday, moving toward the upper end of the weekly range. With little of note on the domestic calendar the AUD bounced between session lows at 0.7065 and intraday highs at 0.7093, buoyed by broader USD weakness as the world’s base currency suffered its worst weekly decline this year.
Having bounced off 0.7003 the AUD has found sustained support at 0.7050 as the USD submits to a downward correction. A string of soft US data sets has amplified concerns the economy is beginning to slow, supporting the Fed’s message of patience and adding downward pressure on the world’s base currency. The US depreciation and a sustained uptick in risk appetite has helped stave of moves below the psychological 0.70 handle and the AUD appears well bid with scope for a short-term rally toward 0.7150/0.72 if we can break resistance at 0.71.
Attentions this week turn to Thursday’s employment data. With the RBA recently doubling down on the importance of the labour market as a driver of future growth. A downturn in employment gains and an uptick in the unemployment rate will amplify calls for the RBA to cut rates before the year is out.
Key MoversThe New Zealand dollar advanced higher through trade on Friday boosted by an increase in Business NZ Manufacturing released early morning. Opening at 0.6825, the Kiwi moved 20 points higher by mid-morning as the manufacturing sector remained in expansion mode with steady construction sales.
With little offshore news to drive the NZD/USD cross, the pair remained in a sideways pattern to close the week steady at 0.6845. Softer US data on Friday evening including a weaker than expected Industrial production print hindered any upside on the Greenback.
This week on the agenda is the release of Westpac Consumer Sentiment on Tuesday and 4th quarter GDP for 2018 on Thursday. The New Zealand dollar opens steady this week at 0.6848 in what looks to be a quiet day on currency markets to start the week.
The Pound was supported last week by an extension of Article 50 that was passed by Parliament in the UK. The UK’s exit from the EU was due on March 29th though this is now not likely possible as there are now plans to try and pass another vote by March 20th for a technical delay to give them time to come to an agreement with the EU.
Cable opened at 1.3240 and extended its relief rally to 1.3285 on close as it continues to move off releases to the media surrounding Brexit decisions. Finishing over 2% higher on close, this week we will have some meaningful domestic macroeconomic data releases domestically including the release of the latest CPI print on Wednesday and the latest Bank of England interest rate decision whereby it is widely expected rates will stay on hold at 0.75%.
Sterling opens this morning at 1.3295 against the Greenback with short-term support expected to hold at 1.3220 with any upside movements potentially seeing resistance at March 14th highs of 1.3350.
The US dollar opened at 0.7085 this morning against the Australian dollar, still unable to clear the 0.7100 resistance ceiling. The currency pair continues to be tumultuous among good performance of US equities and the uncertainty surrounding the US-China trade war upon the news that meetings between the two nations leaders would be delayed.
Eyes turn to the FOMC talks scheduled for Thursday. Expected to have major impacts on the USD, they will release their Economic Projections, Statement, Federal Funds Rate and hold a Press Conference. These will show a projection for inflation and economic growth over the next 2 years, as well as contain their outcome of the vote on interest rates and other policy measures.
The Euro closed the week with gains amid poor demand for the Greenback, the EUR/USD advanced to a near two-week high of 1.1344 on Friday despite an increase in the Eurozone inflation rate. The euro area annual inflation rate was 1.5% in February, up from 1.4% in January, and 1.1% for the same time last year, according to Eurostat, the statistical office of the European Union. And EU annual inflation was 1.6% in February, up from 1.5% in January, and 1.4% in February 2018.
Looking ahead, the Eurozone will report on trade figures. On the technical front, support comes in at the 1.1300 where a break will aim at the 1.1250 level. A break below here will target the 1.1200 level. On the upside, resistance resides at the 1.1350 level with a breakthrough there opening the door for further upside towards the 1.1400 level.
The Canadian dollar remained largely range bound for much of Friday, edging marginally lower despite a broader USD self-off and weakness in the world’s base currency. Having advanced to touch highs at 0.7520 the CAD slipped back below 0.75 to touch intraday lows at 0.7481.
The CAD has struggled to break outside relatively tight ranges through the last fortnight, pitching between 0.7430 and 0.7520 as higher oil prices and closeness to the outperforming US economy battle a lack of fiscal and monetary stimulus. While we see little USD upside through the short-term, risks of a downward correction in oil prices and a widening gap in interest rates could force the CAD lower moving into H2 this year.
Attentions this week turn to the government budget Tuesday as a key marker of possible fiscal stimulus, while wholesale trade sales headline Thursday’s docket and retail sales and inflation promise a potentially volatile close on Friday.
- AUD/NZD: 1.0300 - 1.0400 ▼
- GBP/AUD: 1.8650 - 1.8900 ▲
- AUD/USD: 0.7040 - 0.7120 ▲
- AUD/EUR: 0.6200 - 0.6300 ▼
- AUD/CAD: 0.9380 - 0.9500 ▲