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Aussie has 73c in sight, but further upside may not be so easy

By OFX

The Australian Dollar initially dipped vs the Greenback a little at the start of last week and hovered just under 72c gaining momentum on Thursday with the US Fed softening their stance on monetary policy. Friday, we opened around 0.7265, saw a high of 0.7284 and a low of 0.7236. A release of economic data had mixed feelings amongst the market, dwelling prices across the capital cities fell by 1.2% in January and by 6.9% in the year to January with every capital city seeing a fall apart from Canberra. Meanwhile, The AiG performance of manufacturing index rose from 50.0 in December to 52.5 in January, indicating a slight pickup in manufacturing activity back to expansion.

Looking ahead, we see the release of MI Inflation Gauge, Building Approvals and ANZ Job Ads.

On the technical front, immediate support sits at 0.7200 followed by 0.7140. On the upside, resistance sits at 0.7290 and 0.7300.

The New Zealand Dollar tested 1-month highs on Friday evening in the lead up to Non-Farm employment figures released in the United States. Opening at 0.6915 the NZD/USD moved sideways during the domestic session as there was little to note domestically. Intraday highs re-tested Thursday mark of 0.6940 before the greenback finished stronger to end the week.

Non-Farm employment figures spurred the US Dollar to stronger levels despite the unemployment rate ticking higher to 4.0% for the first time since July 2018. 304,000 Jobs were added for the month of January, soaring from its forecasts of 179,000.

The Kiwi closed just below support levels of 69 US cents as we see a light week of macroeconomic data on the domestic front. The latest GlobalDairyTrade auction is scheduled for release on Wednesday evening.

The New Zealand Dollar opens this morning at 0.6890.

The Great British Pound fell through trade on Friday, extending Thursdays correction and giving up gains hard won in January. Having enjoyed its strongest monthly advance in over 12 months throughout January, Sterling stumbled on the back of softer domestic macroeconomic data sets. Survey data released Friday showed a broad spread pessimism and uncertainty among UK production units and factories. Orders are beings stockpiled for fear a deal will not be agreed, hampering output and forcing the GBP toward 10-day lows against the Euro and below key supports against the Greenback.

Having clawed its way back above 1.30 through the last 4 weeks Sterling tested the 200-day moving average at 1.3045 and a consolidation extension below this handle could prompt a deeper correction as our attentions turn to Thursday Bank of England inflation report and Monetary Policy Committee decision. While broader direction will be governed by ongoing Brexit developments a pessimistic outlook form the BoE will likely prompt further weakness as an extended period of uncertainty weighs on committee members ability to drive domestic growth through Monetary Policy change.

The US dollar edged marginally lower through trade on Friday, slipping on data that showed wage growth slowed through January. Despite a strong surge in job creation (highest print in 11 months) investors increased sensitivity to wage and price inflation forestalled the Greenbacks upward advance as average hourly earnings grew just one tenth of a percent, well below the 0.3% anticipated. The miss reinforces the Federal Reserve’s patient stance and further reduces the likelihood the FOMC will cut rates this year.

Investors are now shorting recent USD longs on expectations the worlds base currency will fall throughout the coming months as markets and analysts continue to adjust monetary policy expectations. The shift in Fed rhetoric validates market calls the central bank will not hike rates this year and reduces the likelihood of a near term correction for the USD.

Attentions remain keenly attuned to key macroeconomic data sets as prints delayed by the shutdown are released this week, with risks to trade pushed back until presidential talks can be held later this month.

The Euro remains relatively unchanged against its counterpart the United States Dollar despite some mixed fortunes on the economic calendar. Opening this morning at 1.1457, the Euro looks to trade within a tight range.

Friday saw some stronger US data with non-farm payrolls coming in decidedly upbeat. The result saw the Euro fall initially but the Euro’s fortunes reversed quickly when core CPI data for the euro area came in slightly stronger than expected. The surprise core-CPI result carried the Euro to the close in a relatively unchanged position.

Moving into the start of a new week, the Euro looks set to enjoy a quiet day on the domestic front with direction to be driven by offshore announcements.

Friday saw the Canadian dollar soar to its highest level in nearly 3 months when valued against its US counterpart. Rising oil prices and improving US-China trade sentiment were the primary drivers, forcing the USD/CAD to 1.3089 on the day. Oil prices benefited from supply side pressures, as producer cuts and US sanctions on Venezuelan exports constrained supply.

AUD/CAD traded flat last week however the cross is 0.27% lower for the month and 1.23% lower YTD as the loonie has outperformed all majors on a YTD basis. This CAD strength has led some analysts to suggest the currency has been overbought, with traders now looking towards Mondays trade stats, Tuesdays housing figures and Fridays jobs market data for an indication on how the domestic economy is performing.