The Australian Dollar recovered significantly throughout Thursday as the employment report smashed expectations. Opening this morning at 0.7194, the Aussie also found support from US Dollar weakness and another attempt by US Treasury Secretary Mnuchin at reconciliation with China.
Kicking off at home, the Aussie found its feet on Thursday with a positive jobs report. The highlight of the report was the Australian economy adding 44,000 jobs against an expected 18,000. The Australian Dollar jumped significantly on the news to test the key 0.72 level but failed to break through. Ultimately however, it did spur on a positive advance for the Aussie and helped it holds its gains for the day.
The shift in sentiment was also assisted by off-shore forces with the USD weakening slightly after a poor CPI result. The broader interest rate narrative was still very positive however due to a good jobs report earlier in the week, nevertheless the small decline in the CPI reading did weaken the Greenback. The USD also gave ground earlier in the day after US Treasury Steve Mnuchin, a moderate voice within the Whitehouse, reached out to China to continue the trade dialogue. The glimmer of hope of a reconciliation also supported the Aussie well into Thursday.
Moving into the end of the week, the Australian Dollar enjoys a quiet economic calendar with the focus squarely on off-shore events to drive direction.
AUD / NZD
Expected Range: 1.0875 – 1.0975
The NZD opens 0.2% higher against the USD overnight as weaker than expected inflation numbers out of the worlds largest economy forced the USD lower. The NZD/USD pair did rise as high as 0.6590 after the release however further twitter commentary from President trump regarding the Chinese trade situation hurt both the AUD and NZD units.
We also had NZ food price data for august yesterday which came in slightly lower than expectation. A key input for Q3 CPI, traders will be looking towards todays PMI release as further evidence that the domestic economy is cooling. The NZD/AUD cross was volatile yesterday as a strong labour market report pushed the pair lower to 0.9107 before trump’s china tweets bailed out the NZD, seeing it rise to 0.9135.
On the technical front, we now see NZD/USD first supports at 0.6560 with topside resistance visible at levels nearer to 0.6700.
GBP / AUD
Expected Range: 1.7830 – 1.8230
The Great British Pound rose to its highest level in six weeks against the greenback last night. The GBP/USD pair reached a high of 1.3121 on the back of U.S. dollar weakness. In the UK yesterday the Bank of England kept interest rates on hold at 0.75% on Thursday and highlighted greater financial market concerns about Brexit, a month after raising borrowing costs for only the second time in more than a decade.
Looking ahead today and the macroeconomic calendar is empty with no scheduled releases. Bank of England’s Governor Carney is due to speak at the Whitaker Lecture in Dublin to discuss Monetary Policy.
From a technical perspective, the GBP/USD pair is currently trading at 1.3108. We continue to expect support to hold on moves approaching 1.3080 while now any upward push will likely meet resistance around 1.3130.
AUD / USD
Expected Range: 0.7030 – 0.7280
The United States Dollar Index (DXY) shed another 0.28% in overnight trading to open this morning at 94.54. The Greenback lost a little ground after the CPI reading came in below expectations and also weakened after news of a trade dialogue between US Treasury Secretary Mnuchin and China.
Markets continued to trade in a relatively tight range throughout the day as the trade war between the US and China continued its dampening effect on sentiment. There wasn’t too much news on that front overnight but there was month-on-month core CPI and CPI reports to digest. Disappointingly for the USD, the numbers came in slightly lower than expected, leading to a broad selloff in the Greenback. Markets however, quickly corrected after the initial news to trade just below where it was before the CPI report.
The Federal Reserve’s Bostic also added to the interest rate conversation overnight saying that the FOMC will wait and see the data before adding a fourth rate hike this year. The comments were interpreted as mostly neutral and had little effect on the exchange rate.
Moving into the end of the week, the Greenback turns to its month-on-month retail figures for direction while also keeping an eye on any new trade headlines.
AUD / EUR
Expected Range: 0.6110 – 0.6220
Thursday saw EUR/USD advance to fresh two-week highs as the pair touched 1.17 in early North American trading before fading into this morning Sydney open where we open at 1.6923. The ECB failed to surprise markets by deciding to keep interest rates on hold with ECB president Mario Draghi reiterating that underlying economic strength in the eurozone was supportive of the banks confidence in the inflation rate returning to their target level in the near term.
In outlining that the bank would remain accommodative with its monetary policy stance, Draghi didn’t adopt a hawkish tone as some were expecting however the EUR still rallied against the USD throughout the press conference as the greenback suffered selling pressures on the back of the weak CPI read.
New technical levels to watch are 1.1700 on the upside with new downside supports at levels nearer to 1.1635 and 1.1570 respectively.
AUD / CAD
Expected Range: 0.9300 – 0.9400
The Canadian dollar firmed to a two-week high against its U.S. counterpart on Thursday reaching an overnight high of 1.3025 on the back of weaker-than-expected U.S. inflation data weighed on the greenback, offsetting a pullback in crude oil prices. US Inflation data came in below expectations for the second day in a row up 0.2% in August, below the 0.3% of market consensus and the annual rate eased from 2.9% to 2.7%. The loonie has been boosted this week by optimism that a deal to renew the North American Free Trade Agreement would be reached and a jump in the price of oil, one of Canada’s major exports.
Looking ahead today and the macroeconomic calendar is empty with no scheduled releases.
From a technical perspective, the USD/CAD pair is currently trading at 1.2999. We continue to expect support to hold on moves approaching 1.2980 while now any upward push will likely meet resistance around 1.3025.
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