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AUD continues its bid-tone ahead of FOMC

AUD - Australian Dollar

AUD managed to outperform many of its major peers as the currency begins to catch-up on trade de-escalation headlines. AUD/USD continued its bid-tone overnight gaining from yesterday’s lows of 0.6836, hitting a high of 0.6872 during the New York session. It is currently sitting around 0.6860 (+0.40%) ahead of CPI to be released this morning at 11.30am (AEDT). The consensus is looking for a 0.4% increase to trimmed mean CPI, with CPY QoQ expected to drop from 0.6% to 0.5%. A softer than expected reading could impede on the AUD’s bullish run this week as the RBA would likely have to weigh this into the policy outlook. Key levels of intra-day support to watch are 0.6850 (100-Day Moving Average), 0.6842 (Daily Fibonacci 23.6%), 0.6790 (50-Day Moving Average). Resistance sits at 0.6883 (October high) and 0.6958 (200-Day Moving average).

Key Movers

The New York session was one of consolidation with the US Dollar Index flat, S&P down -0.08% and the US 10 year Treasury closing at 1.8385% (after touching a monthly high at 1.8580%), ahead of tonight’s important FOMC meeting. Implied probability of a 25-basis point cut sits at 94%, almost a certainty, but investors will be watching closely what Jerome Powell has to say on forward rate guidance and the divide among FOMC members.

The Brexit headlines continued overnight with UK parliament voting overwhelmingly (438-20) to have a general election on December 12th. The bill will need to go to the House of Lords before getting its Royal Assent on Thursday. Its expected that there is to be minimal disruption in the Upper House. Interesting to note that many of the Ministers abstained, signaling reluctance amongst the vote. GBP/USD was fairly volatile overnight touching lows of 1.2807 before spiking 0.77% to a high of 1.2905 as the Labour Party announced it would back the election. It is now sitting around 1.2865.

Expected Ranges

AUD/USD: 0.6820 - 0.6885 ▲

AUD/EUR: 0.6135- 0.6190 ▲

GBP/AUD: 1.8705 -1.8854 ▼

AUD/NZD: 1.0750 - 1.0825 ▲

AUD/CAD: 0.8940 - 0.9020 ▼