Home Daily Commentaries AUD struggle to break beyond 0.7425 as trade tensions cast pall over markets

AUD struggle to break beyond 0.7425 as trade tensions cast pall over markets

Daily Currency Update

The Australian Dollar remains relatively unchanged in overnight trading opening this morning at 0.7388 against the Greenback. The Pair spent most of the day consolidating around yesterday’s open with only a few intra-day movements in either direction. Again, the Aussie touched, and failed to hold, above the 0.74 resistance level.









Market conditions eased throughout most of the day as the United States enjoyed their fourth of July holiday and Australia savoured a quiet domestic calendar. Nevertheless, Traders did have some events to chew on with a US trade representative confirming that 25% tariffs on $34b worth of Chinese goods are expected to take effect at midday in Washington with another $16b worth of goods slated for later this month. China has vowed to retaliate in kind which the market has mostly factored in to their valuations. Traders however stand poised to adjust their valuations as the rhetoric continues to suggest that more trade tensions may be coming.




Closer to home, the Aussie looks to the AIG Construction Index for insight domestically. Later in the day, attentions turn to the on-going tariff implementation which is of key interest to Australian based traders. Widely considered an imperfect proxy for China, the Australia Dollar stands to enter a volatile period should tariffs be implemented.

Key Movers

The New Zealand dollar crept higher Thursday, advancing half a cent to touch intraday highs at 0.6797 with no real marker driving the upturn. Investors largely shrugged aside upbeat U.S Macroeconomic data and the FOMC minutes confirmed the Feds commitment to interest rate normalization. Advancing 0.4%, up from 0.6750 the Kiwi took advantage of broader USD softness as preliminary non-farm payrolls printed below expectations and markets looked to take profits ahead of the expected introduction of US imposed tariffs on Chinese exports.




Trade tensions continue to cast a pal over broader market direction and capped NZD gains with investors rebuffing advances approaching 0.68. The US is expected to introduce a 25% tariff on $34 billion in Chinese exports with expected escalation should China retaliate. China have made clear they will respond in kind and we expect investors will sit on the fence with direction constrained to current ranges until a clearer picture emerges later today. A tit for tat tariff program could quickly escalate into a full scale trade war further hampering demand for risk and adding to mounting downward pressure on the NZD.



Attentions today remain squarely fixed on trade developments while US. Non-farm payroll number headline the global macroeconomic docket.


The Great British Pound continued its rally higher following the favourable reading of services output on Wednesday evening and an intraday high of 1.3270. The rally was supported by bullish remarks by Bank of England Governor that inflation continued to climb and confirmed reasonable expectations of an interest rate rise at some time this year as per household surveys.



Unfortunately for the Sterling, the 1.33 handle was unable to be broken and a drop sharply lower occurred on Brexit comments from Secretary David Davis to Prime Minister May that the current customs plan are unworkable.




Following the Brexit remarks, cable dropped to support at 1.3205 before stablising through North American trade and trading sideways through the latest release of FOMC monetary meeting minutes.


With little on the agenda this evening we shift the focus to North America where several releases from both Canada and Unites States will determine direction into the weekend.


The Great British Pound opening this morning at 1.3220 against the US Dollar.


Overnight it was announced that President Donald Trump’s tariffs on Chinese products are set to begin with a 25% tariff applying to 818 Chinese goods. The Chinese government has promised to retaliate with tariffs on equal measure soon after Trump’s tariffs go into effect. China exported approximately $US34 billion worth of newly tariff-eligible goods to the US last year.






On the data front yesterday ISM Non-Manufacturing PMI index was revised to 56.2 from 56.0 and the official ISM one up to 59.1 from 58.6 in May. We also saw the release of Federal Open Market Committee (FOMC) meeting minutes which reaffirmed policymakers are commitment to raising interest rates gradually in the near term. Looking ahead today and all attentions turn to Friday's Trade Balance and Nonfarm Payroll report. The US economy is expected to have added 195K new jobs in June, the unemployment rate is seen at record lows of 3.8%, while wages are expected to remain subdued, up monthly basis 0.3% and by 2.8% YoY.



From a technical perspective, the US Dollar is flat against the Japanese Yen confined to a tight 40 pip range 110.65. The Pound Sterling reached a weekly high against the Greenback 1.3274. The Euro also edged higher 1.1719 on the back of a jump in German Factory Orders. The EUR/USD pair is currently trading at 1.1689.


The Euro was able to gain around 0.30% versus the USD, closing at 1.1690 on the back of reports signalling that some ECB policy makers weren’t comfortable with the market not pricing a rate hike until December 2019.

EURUSD traded all the way up to 1.1718 where it encountered offers ahead of a relatively important technical resistance at 1.1720. The currency was also supported by stronger than expected German Factory orders and PMI numbers.

The attention now will turn to the US and the Chinese tariffs expected to come into effect tonight and the potential response by China. Short-term support and resistance levels are seen at 1.1665 and 1.1720 respectively.


The loonie was able to close Thursday session relatively stronger versus the USD at 1.3132, still trading on a thin range between 1.3115 and 1.3160.

It seems like the market continues waiting for new Headlines around the US-China tariff drama before moving on either direction. WTI oil lost some ground on a higher than expected increase in US crude inventories.

From a data point perspective, we will get Canadian trade and job figures Tonight. Rate hike probabilities for next week BOC meeting are still sitting above 80% which should be supportive of a stronger CAD but first the cross needs to break below the important 1.3120 support level. On the upside, there is small resistance seen around 1.3180 ahead of a potentially stronger resistance level at 1.3250.

Expected Ranges

  • AUD/NZD: 1.0835 - 1.1015 ▼
  • GBP/AUD: 1.7780 - 1.7980 ▼
  • AUD/USD: 0.7330 - 0.7430 ▲
  • AUD/EUR: 0.6280 - 0.6380 ▼
  • AUD/CAD: 0.9650 - 0.9750 ▲