Australian dollar bounces with emerging markets

AUD

The Australian dollar is back above 0.74 cents this morning amid the improved risk-off sentiment. The Aussie reached an overnight high of 0.7437 after a bounce in US equities and base metals.

Yesterday on the local data front Australian Consumer Inflation Expectations decreased by 0.3 percentage points in July to 3.9 per cent (from 4.2 per cent in June). Looking ahead today and the macroeconomic calendar in Australia is empty with no scheduled releases. No doubt markets will again today be focusing on any further trade war developments between the US and China.

From a technical perspective, the AUD/USD pair is currently trading at 0.7403. We continue to expect to hold on moves approaching 0.7370 while now any upward push will likely meet resistance around 0.7450.

AUD / NZD

Expected Range: 1.0850 – 1.0980

This morning the New Zealand Dollar opens a touch higher at 0.6775 when valued against its U.S counterpart. Risk appetite was a little stronger with markets finding some relief overnight as US-Chinese trade tensions took a backseat for now. China has not immediately retaliated to Trumps imposed tariffs on $200b worth of imports. A spokesman for the Chinese Ministry of Commerce said China would take “necessary” steps to defend its interests but didn’t explicitly say it would respond with equivalent measures while China’s vice minister of Commerce said “we should sit down and try to find a solution to this trade problem”. Meanwhile US Treasury Secretary Steve Mnuchin who told the US House Financial Services Committee that the US was “available” for negotiations, if China made structural changes.

Little reaction overnight to the US CPI figures, Consumer prices rose 0.1% in June and on an annual basis lifted 2.9% in June, from 2.8% in May. It is the fastest annual pace in six years however still missed expectations.

Looking ahead, NZ PMI is due to be released this morning followed by Chinese Trade balance a little later. Tonight the University of Michigan July preliminary consumer sentiment index. From a technical perspective, immediate support at 0.6750 with resistance at 0.6800 and 0.6860.

GBP / AUD

Expected Range: 1.7720 – 1.7980

The Great British Pound edged marginally higher Thursday moving off intraday lows below 1.32 following the release of the Governments Brexit blueprint. The plan appears to support hopes for a “soft Brexit” wherein strong trade ties are maintained, minimising the broader impact on the economy. Bouncing to 1.3240 markets response was muted given much of the policies were largely priced in already while concerns the EU will demand a greater list of concession weighed on optimism.

The Brexit saga continues to cast a pall over Sterling’s performance, hampering upward momentum. The uncertainty of the scenario and absence of a clear path ahead has ensured investor nerves remain frayed dampening appetite to extend long positions and suppressing extensions beyond 1.3350.

Attentions now turn to next weeks macroeconomic docket with wage growth, CPI and retail sales prints all due. Strong reads across the board will support claims the sluggish start to the year is turning and prompt investors to price in an August rate hike adding support to GBP while political turmoil and ongoing Brexit news dominate broader direction and appetite.

AUD / USD

Expected Range: 0.7330 – 0.7430

The United States Dollar remained relatively strong in overnight trading despite risk appetites returning to the market. Commodity currencies were the primary beneficiaries of increased risk sentiment with the Aussie, Loonie and Kiwi all posting healthy recoveries against the worlds reserve currency. Across the Atlantic, the Greenback failed to make inroads with the Sterling and Euro which remains mostly unchanged from yesterdays reading. The US Dollar Index (DXY) opens this morning slightly higher at 94.83.

Attentions were again dominated by news on the on-going trade war which had an unexpected turn in overnight trading. China didn’t immediately respond to the news of the extra $200b tariff that President Trump touted. Instead, the market enjoyed headlines suggesting that China and the US would resume trade talks. The effect on markets was almost immediate with capital flowing back into risk assets and commodity currencies enjoying the positive flow. US CPI Inflation data was also released during the American trading session which came in unexpectedly lower at 0.1% for June. Nevertheless, the broader narrative points to a healthy economy with Inflation on an annual basis rising to 2.9%, the fastest growth since early 2012.

Closing out the week is a mild economic calendar with little to excite foreign exchange markets. Again, traders will turn their attentions to the headlines and look for clues on any developments in the trade war.

AUD / EUR

Expected Range: 0.6280 – 0.6350

EURUSD was little changed on Yesterday’s session, closing around 1.1672 and trading within a very narrow range between 1.1653 and 1.1696.

With US CPI data coming mostly in-line with expectations and the US/China trade tensions soothing there wasn’t a strong reaction towards the Euro. The risk-on sentiment affected more the commodity spectrum and Emerging Markets while it seems the Eurozone is expectant of what will come from the next round of Brexit negotiations.

From a technical perspective, Yesterday’s session provided some good insights, as it seems the 1.1650 level is consolidating as a strong short-term support while resistance should be found above 1.17, with the 55-day moving average sitting around 1.1750.

AUD / CAD

Expected Range: 0.9680 – 0.9780

The USDCAD traded back below 1.32, with the loonie strengthening almost 0.50% versus the USD supported by a positive mood in markets and a spike in commodity prices.

China hasn’t yet announced retaliatory measures to Trump’s potential $200bn tariff implementation and the market took this as positive sign, hoping the dialogue between the two countries might resume with a better tone.

The loonie ended the session around 1.3150, which seems to be acting as good support for the USD as the USDCAD is now opening in Asia a little bit weaker at 1.3170. ON the upside, 1.32 should now act as short-term resistance.