AUD stuck below 0.69 despite improved trade rhetoric

AUD - Australian Dollar

The Australian dollar offered little to excite investors through trade on Friday, bouncing between 0.6865 and 0.6890. A lack of headline domestic data saw investors focus drift offshore as trade talks again dominated broader risk trends. Sentiment improved as US and Chinese trade delegates moved one step closer to a resolution in what has now been a protracted tariff dispute. China announced new exclusions on US goods, specifically soy beans and pork, while the US promised a delay on planned tariffs from October 1 to October 15, allowing talks to run their course. The improved rhetoric helped the Yuan recoup some of its recent losses providing some support for the AUD, when other commodity currencies shifted lower.

Attentions this morning will be focused on oil, with prices expected to jump sharply after the weekends drone strike on Saudi Arabian production facilities. The hit is expected to cut the country’s output by 50% adding significant strain on the worlds oil supply reducing the global refining capacity by close to 6%. Oil prices are expected to jump sharply higher and a protracted period of higher prices will further damage global growth prospects, adding some downside pressure on the AUD and offsetting the uptick in commodities.

Watch for sustained resistance at 0.6890 and support at 0.6830 and 0.6780 ahead of Wednesday's Federal Reserve Policy Meeting.

Key Movers

The Great British Pound continues its headline risk vulnerability, advancing through trade on Friday after reports Northern Irelands largest political party had agreed to accept European rules post Brexit, prompting a surge of optimism a resolution to Irish backstop concerns can be found. Sterling surged toward 1.25 and near two-month highs as investors looked to correct short positions.

Attentions remain squarely affixed to headline risk events as the likelihood of a no deal Brexit has been significantly reduced.

The US Federal Reserve remains in focus this week with the FOMC expected to cut rates on Wednesday. With a large swathe of the market already pricing in a 25 basis point cut our focus turns to the accompanying rate statement and commentary. The promise or lack thereof of additional rate cuts will drive direction.

Expected Ranges

AUD/USD: 0.6780 - 0.6890 ▲

AUD/EUR: 0.6090 - 0.6270 ▼

GBP/AUD: 1.7860 - 1.8390 ▲

AUD/NZD: 1.0720 -1.0820 ▲

AUD/CAD: 0.9010 - 0.9190 ▲