Posted by OFX
Monday saw the AUD gain on trade optimism with AUD/USD rising to two-week highs at 0.7160. The Aussie was aided by USD weakness in light of the US bank holiday which yielded lighter trading and largely contained global markets. Notably we did see the Aussie face selling pressure later in the session as traders looked crystallize profits ahead of the RBA minutes Tuesday morning, ultimately forcing AUD/USD lower to levels around 0.7125.
The Aussie’s rival across the pond was one of the biggest underperformers on Monday with NZD/USD falling from 0.6885 to 0.6840 which allowed the AUD/NZD cross to rise 20 points over the course of the day to reach 1.0410.
Looking ahead, RBA meeting minutes are due out at 11:30am Sydney time with offshore releases such as UK labor market data for December and second tier data due out of both Europe and the USA. Focusing on the RBA minutes, markets are not expecting a great deal of new information, especially given last week’s monetary policy announcement and extensive commentary from Governor Lowe.
Adopting a technical approach, we see first lines of support at 0.7100 followed by 0.7070 and 0.7030 on the downside whilst anticipate topside moves to meet resistance on approach to 0.7145 and 0.7190 respectively.
New Zealand Dollar
AUD / NZD Expected Range: 1.0320 – 1.0520
The New Zealand Dollar lost it’s gains yesterday, hitting a one-week high of 0.6887 against the United States Dollar, than falling below the resistance floor of 0.685 to open at 0.6846 this morning. Even though no news was released, a little volatility was expected yesterday during US Banking Holiday Presidents Day, as speculators become a more dominant market influence.
We can expect to see some pricing change due to the Global Dairy Trade price index expected to be released tomorrow. Showing the change in weighted-average price of the 9 dairy goods sold at auction, it is a leading indicator of the nation’s trade balance with other countries because rising commodity prices boost export income.
GBP / AUD Expected Range: 1.7950 – 1.8350
The Great British Pound rallied through trade on Monday pushing back through 1.29 and bouncing off a third consecutive weekly decline as investors take stock of current positions ahead of key talks between Brexit negotiators and the EU. Despite deeper political divisions and the resignation of seven labour politician’s sterling found support in optimism May will reach a last minute compromise with EU leaders as she scrambles to resuscitate her Brexit agreement. Increasing instability from within the conservative government and a push from ministers to stop the UK leaving without a deal has added support to the GBP as the possibility of an extension of Article 50 increases.
The pound remains vulnerable to broader Brexit negativity and as we move closer to the March 29 deadline without a deal the downside risks and uncertainty are only exacerbated. Business leaders are becoming increasingly fearful a deal will not be reached and are rushing to put in place contingency plans that could see key industries move large sections of operation outside the UK should the two parties split without a deal in place. Industry leaders have stated a no deal divorce would be catastrophic not just for their business interest but for the broader UK economy and politicians inability to grasp the true implications are truly terrifying.
Attentions today turn to wage growth and employment data as key macroeconomic indicators guiding BoE policy, while Brexit headline news dominates the broader directional theme.
United States Dollar
AUD / USD Expected Range: 0.7050 – 0.7180
The Greenback has start the week on the slide attributed to hopes surrounding and US-China trade deal boosting demand for high-yielding assets. The Greenbacks movements have been limited due to the absence of macroeconomic releases. The U.S. dollar tends to perform well during bouts of investor nervousness.
Looking ahead today and it’s a U.S. bank holiday. There are no scheduled releases.
From a technical perspective, the Greenback is currently weaker when valued against the Australian dollar trading at 0.7128 (-0.12%) and New Zealand dollar 0.6851 (-0.09%) while strong against the Pound Sterling 1.2918 (0.11%) and Japanese Yen 110.56 (0.09%).
AUD / EUR Expected Range: 0.6280 – 0.6350
The Euro advanced through trade on Monday as its correlation with risk appetite and performance continued. The 19 nation combined unit was bolstered by optimism surrounding a possible breakthrough in US-China trade talks. Having dropped to a three month low on Friday the Euro bounced back through 1.13 to touch intraday highs at 1.1318.
The Euro has been largely stuck amid a broadly bearish downtrend through the last few months struggling to make a significant advance beyond resistance amid speculation the ECB will offset dwindling economic returns and broader growth prospects by extending its current platform of accommodative monetary policy. While supported by expectations the Fed will slow the pace of its current path to neutral cracks are beginning to appear in recent ranges and the Euro appears increasingly vulnerable to a deeper downward correction and move toward 1.10.
Attentions today turn to German PPI and Eurozone consumer confidence as mid level macro indicators ahead of a raft of manufacturing and service level data due Thursday. Softness across these markers will underpin recent growth concerns and could be the catalyst to force a break below 1.1250.
AUD / CAD Expected Range: 0.9320 – 0.9520
The Canadian dollar is little changed against the Greenback, down 0.15% in the Monday session. Low oil prices are weighing on the economy and on the Canadian dollar. The currency has slipped 1.2% in February. The Bank of Canada is unlikely to raise rates at the March 6 meeting, but there is room for rate hikes later in the year if economic growth improves.
On the data front there are no scheduled releases today. Along with a U.S. Bank holiday today we can expect limited movement from USD/CAD.
From a technical perspective, the USD/CAD pair is currently trading at 1.3239. We continue to expect support to hold on moves approaching 1.3220 while now any upward push will likely meet resistance around 1.3360.
Posted by OFX