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Aussie flirts with a break above 0.71

By OFX

The Australian dollar edged higher through trade on Monday, creeping back above 0.71 US cents in what was otherwise a relatively quiet start to the week. With little data on hand to spark direction the AUD rallied to touch two week and intraday highs at 0.7119 as equities continued to drive risk appetite and a jump in iron ore prices underpinned AUD demand, before selling pressure forced the currency back below 0.71.

The AUD has struggled to break outside ranges of late, hamstrung by a sustained softness in domestic economic indicators and heightened expectations the RBA will be forced to cut rates at least once through the second half of the year.

Attentions now turn to the RBA’s policy meeting minutes for direction through trade today while, Thursday’s employment print remains a key docket item governing short term direction. Softness across labour market data will add to calls for looser monetary policy and could force the AUD back toward supports at 0.7050 and 0.70.

The New Zealand dollar edged higher during the domestic session yesterday in what was a quiet start to the week. Opening at 0.6848, the Kiwi moved higher to an intraday high of 0.6875 on broader US dollar weakness, trading in a thirty-pip range overnight.

Tuesday looks to have more meaningful price action as Westpac Consumer sentiment was released to market this morning down 5.3 points to 103.8. It has been reported that consumer confidence remains at lows as households continue to be worried about their financial outlook in general.

This morning the New Zealand dollar opens at 0.6850 ahead of the release of Monetary Policy meeting minutes across the Tasman today with the latest Global Dairy Trade auction scheduled this evening.

Financial markets have mostly been quiet overnight as the lack of news flow saw prices track sideways. The Great British Pound was the only exception with the Sterling softening across all the majors to open this morning at 1.3240.

This is shaping up to be an important week for the Pound as Prime Minister May’s originally planned Brexit vote on Tuesday was blocked by Parliament. The deal needs to be “fundamentally different” according to the House of Commons Speaker John Bercow. This only added to the uncertainty surrounding Brexit as Theresa May has yet to request an extension to Article 50 and time is running out.

Moving into Tuesday the Sterling continues to monitor the Brexit headlines as well as release their average earnings index and unemployment rate.

The United States dollar broke through the resistance barrier of 0.7100 to hit 0.7117 overnight, below opening at 0.7095 this morning. A quiet week ahead for the USD, until we hear from the Federal Open Market Committee on Thursday. Until then, the markets are expected to track sideways.

The Federal Reserve Economic Projections report will kick off the scheduled event early Thursday and will show the FOMC’s projection for inflation and economic growth over the next 2 years, and a breakdown of each individual FOMC members interest rate forecasts. It is the primary tool that the Fed uses to communicate their economic and monetary projections to investors. The Statement, and Funds Rate will come after. With the Press Conference to close. The Conference is open to press questions and will provide clues regarding future monetary policy.

The Euro kicked off Monday on the front foot slicing through the 50-day EMA (Exponential Moving average), an indicator that measures trend direction over a period and touched a high of 1.1359 vs the Greenback. Unfortunately, the rally was short-lived on the back of selling pressure and saw the pair pull back to 1.1324 in the North America session.

In other news, Eurozone trade surplus widened from €16 billion in December to €17 billion in January. Looking ahead, the ZEW Institute is to publish a report on German economic sentiment.

On the technical front, support sits at 1.1300 and 1.1212. On the upside, resistance is up at 1.1434 and 1.1553

The Canadian dollar enjoyed a largely slow start to the week, bouncing amid a 50-point range as a spike in crude oil prices and a consolidation of USD holdings prevented investors from extending moves beyond recent support and resistance handles. Having enjoyed a small uptick through last week the Loonie slipped back below 0.75 as markets preferred to bench bets ahead of a series of key risk events.

Attentions turn first to the Federal Reserve policy announcement Wednesday, recent softness across domestic data sets and expectations the Fed will maintain an accommodative monetary policy platform through 2019 have weighed on the USD through recent weeks and forced the world’s base unit off key short-term highs at 1.3437. We then shift focus toward Canadian inflation data Friday as core CPI and retails sales data dominate the docket. With the BoC recent dovish turn still in focus a soft read could compound expectations for a sustained period of accommodative monetary policy, weighing on the CAD moving into H2 2019..