Aussie holds onto short term support, but for how long?
Thursday 12 March, 2020
Daily Currency UpdateAUD - Australian DollarThe Australian dollar remained largely range bound through trade on Wednesday, bouncing between support and resistance handles at 0.6480 and 0.6530. Broader moves across currency markets were relatively modest when compared with the whipsawing price swings plaguing equities and stocks. The S&P 500 plunged 6% as investors made another concerted push to safe haven assets, disappointed that the White House and President Trump had failed to expand on Tuesday’s announcement of fiscal stimulus and support. US rates and yields slipped again through trade on Wednesday, helping arrest Tuesdays downward drive and firming short term supports at 0.6460. With little of note on today’s domestic docket the AUD remains vulnerable and susceptible to broader price moves as volatility across currency markets increases and risk demand drives direction. A detailed fiscal stimulus announcement from the US could help restore confidence across US markets and drive the AUD lower as normal trading fundamentals again steer direction. Watch supports at 0.6460 with a consolidate break opening the door to a deeper downward correction.
Key MoversThe US dollar fell through trade on Tuesday, following plunging equities and stocks lower as markets and investors responded to the White House’s poor response to the broader COVID 19 panic. Having announced fiscal stimulus would be delivered on Tuesday investors were hoping for a more detailed announcement as to what the package entails and where funding will be directed on Wednesday and have so far been left wanting. Broad based sentiment across market analysts suggests the government’s response to date has been lacking and has done little to calm markets and prevent further panic. The dollar fell sharply against the safe haven Yen and Swiss franc down 1% and 0.7% respectively while the dollar index gave up Tuesday’s gains. The Great British Pound enjoyed mixed fortunes after the Bank of England cut its benchmark interest rate by 50 basis points to 0.25% and the Johnson government issued a 30 billion pound stimulus package aimed as propping up the floundering economy. The coordinated response to the COVID 19 threat from both monetary and fiscal policy control centres lifted the Sterling off one week lows, marking intraday highs at 1.2970 before a consolidate push to haven assets forced a shift back toward 1.28. Cable currently swaps hands at 1.2813Attentions today turn to the European Central Bank and its monthly policy setting meeting. Investors are anticipating a string of policy changes and QE measures to fight the coronavirus slow down. President Lagarde reportedly spoke with EU leaders through trade on Wednesday, urging a coordinate response from Governments as well as the Central Bank, in a bid to ensure funding and liquidity remain available. With interest rates already below zero a cut in the benchmark interest rate in unlikely to proffer any real stimulatory response. Instead investors expect the ECB will increase the monthly rate of QE and announce another targeted reduction in lending conditions aimed as SME’s to prompt activity across the broader small business community.
- AUD/USD: 0.6310 - 0.6620 ▼
- AUD/EUR: 0.5680 - 0.5890 ▲
- GBP/AUD: 1.9420 - 2.0120 ▼
- AUD/NZD: 1.0250 - 1.0480 ▼
- AUD/CAD: 0.8820 - 0.9050 ▲