Aussie fails to take advantage of broader USD sell off
Friday 22 June, 2018
Daily Currency UpdateThe Australian Dollar maintained a relatively tight trading handle through Thursday struggling to break back above 0.74 U.S Cents yet finding support on moves approaching 0.7350. The AUD bounced between short formed support and resistance for much of session with little macroeconomic data driving direction risk sentiment continued to drive broader corrections. While moves toward 0.7350 were seemingly well supported and the AUD bounced of intraday lows at 0.7346 upside gains were capped as the Aussie failed to mount meaningful upside pressure and followed equities lower.
Despite a pull back in U.S treasury yields and a broader USD correction the AUD remains vulnerable as long as tariffs and trade remain front and centre. Long considered a proxy for broader risk appetite and Chinese sentiment the AUD is being weighed down by the heightened trade tension between the US and China with upside gains very much dependent on risk demand.
Attentions now turn to crucial US GDP number next week as the next bi ticket macroeconomic driver with trade and political tensions continuing to govern broader flows. Having broken comfortably through 0.7430 and 0.74 a close below those handles this week consolidates the downward correction and could see support form as resistance moving into H2 2018.
Key MoversThe New Zealand dollar opened yesterday morning sitting on 2018 support levels of 0.6860 heading into the latest release of GDP figures. A reading of 0.5% for the March Quarter matched expectations and produced the slowest annual reading in four years of 2.7%.
Despite growth expanding by 0.5% for the quarter, it was not unexpected that a drop from the previous quarter of 0.6% would befall as the kiwi saw little movement after the result.
A sell off in the afternoon trade saw fresh 2018 lows of 0.6825 and is now vulnerable to downside movement should it move through key support lines hovering between 0.6810-0.6830 back to December 2016.
The Kiwi recovered after markets saw a reversal from the US Dollar from yearly highs following the release of weak Philly Fed manufacturing index figures overnight and the NZD/USD cross bouncing back to an intraday high of 0.6883.
As we head into the weekend, today we see the release of visitor arrivals with the New Zealand Dollar opening this morning at 0.6870.
The Great British Pound is stronger this morning when valued against its US counterpart reaching an 24-hour high of 1.3269. The Bank of England overnight decided to leave the official cash rate at 1.5% for another month. The Pound Sterling later surged following an announcement from Chief Economist Andy Haldane who become the third MPC member to vote for a rate hike next month. Looking at rate hike odds, the August probability is now back over 60% from below 50% before the announcement.
Looking ahead today and the UK macroeconomic calendar is light with no relevant data releases. Bank of England will release its Quarterly Bulletin however it tends to have a muted impact because some parts of the bulletin are released early.
From a technical perspective, the GBP/USD pair is currently trading at 1.3243 We continue to expect support to hold on moves approaching 1.3210 while now any upward push will likely meet resistance around 1.3290.
The United States Dollar remains relatively unchanged in overnight trading with the DXY treading water at 94.85. With a slow economic calendar during the session and little economic related news in the headlines, the Greenback’s bullish movement has been stalled and rangebound against most currencies.
The USD did have some movement against some of the cross rates with the EUR and GBP being the clear performers. Changing hands at 1.3243, the Sterling enjoyed a 160-pip rally on the back of a hawkish monetary policy statement. Across the channel, the EUR also faired markedly better than it had been, recording a 100-pip rise against the Dollar before settling at 1.1605.
Attentions now turn to another quiet day on the domestic economic calendar with movement driven by off-shore events in Canada and Europe primarily. OPEC will also meet today which could have far-reaching implications for petroleum prices and financial markets.
The Euro crept higher through trade on Thursday pushing back above 1.16 and touching intraday highs at 1.1630. With little local data to drive direction the 19-nation combined unit took advantage of broader US weakness and softness across US factory orders. The US Philly Fed Factory print posted a sharper than anticipated depreciation in June, marking a considerable moderation from an upbeat print in May falling to 18-month lows. Investors then looked to book profits while the Euro found technical supports on moves toward intraday lows at 1.1510.
Attentions now turn to a series of key manufacturing and services data prints as markers governing direction into the weekend. A strong print across the board could prompt some Euro upside and a shift above 1.1650.
The Loonie opens lower again this morning for the six consecutive day when measured against its US counterpart. As of writing the pair is currently trading at 1.3317, representing a decline of 0.06% on the day. Whilst these are not large moves, we continue to see markets approaching the commodity linked currency with caution ahead of the important OPEC summit this weekend in Vienna. Traders will be watching the OPEC summit closely for any indication of a possible increase in oil output which will further weigh down the loonie.
In what is set to be a busy Friday for the CAD, we have a raft of Macroeconomic data releases due out headlined by April Retail sales numbers for April and Core CPI for may. Traders will be watching these reads closely with strong numbers likely to increase demand for the CAD ahead of the Bank of Canada’s next monetary policy meeting on July 11.
From a technical perspective, resistance is seen for the USD/CAD at the 1.3340 with downside moves appearing to be well supported at levels nearer to 1.3160.
- AUD/NZD: 1.0680 - 1.0780 ▲
- GBP/AUD: 1.7720 - 1.8025 ▲
- AUD/USD: 0.7340 - 0.7430 ▼
- AUD/EUR: 0.6310 - 0.6400 ▼
- AUD/CAD: 0.9750 - 0.9850 ▲