The Australian dollar is weaker this morning when valued against the greenback on the back of Chinese trade data, which showed the US trade deficit with the Asian county reached its highest on record during 2018. While year on year data showed strong gains, a contraction through December raised concerns trade hostilities are begging to weigh on the worlds Second Largest economy. A reduction in imports speaks to the broader slowdown in domestic demand while the dip in exports outside the US (declines in exports to EU and Japan) heightened broader global growth concerns and weighed on the recent recovery of risk appetite.
Today there are no scheduled releases in Australia. All eyes will be on tomorrow’s release of Westpac Consumer Sentiment.
From a technical perspective, the AUD/USD pair is currently trading at 0.7196. We continue to expect support to hold on moves approaching 0.7150 while now any upward push will likely meet resistance around 0.7250.
AUD / NZD
Expected Range: 1.0480 – 1.0620
The New Zealand Dollar seesawed through Mondays trading session moving from a high of 0.6832 around lunchtime down to a low of 0.6796 before close of the Asian session. The main driver for the retreat was softer than expected Chinese trade data which sparked concerns in the markets on global growth. Chinese exports fell 4.4 percent in December from a year earlier while imports dropped 7.6 percent which was the largest decline since July 2016. The data indicates that the U.S tariffs on Chinese goods were taking a toll on China and both countries are still in the middle of a trade war. We finished the session back above 68c after a retirement in US equities.
Looking ahead, the local calendar sees the release of NZIER Business Confidence and Food Prices.
On the technical front, short-term support sits at 0.6800 with resistance up at 0.6850
GBP / AUD
Expected Range: 1.7620 – 1.8090
The GBP rose yesterday against the USD to touch a 2 month high of 1.2911 early this morning. The gains suggest that more MP’s are expected to support PM Theresa May, and that a ‘no deal’ Brexit has become less likely. Theresa May was seen desperately pleading with UK lawmakers to support her tomorrow, as rejecting her Brexit deal could lead to the of the UK. We can expect this volatility to continue during today’s trading session, as we await the crucial vote tomorrow morning.
Later in the evening, Bank of England Governor Mark Carney is scheduled to speak on the Financial Stability Report. As head of a central bank that controls short term interest rates, he has more influence over the nation’s currency value than any other person and his speech will be scrutinized to search for subtle clues on the direction of future monetary policy. The Office for National Statistics will also be releasing their data on the UK CPI, showing the change in the price of goods and service purchased by consumers. Considered to be the UK’s most important inflation data, it is expected to have a major impact on the Pound.
The GBP opened at 1.2863 against the USD this morning.
AUD / USD
Expected Range: 0.7080 – 0.7220
The US dollar index initially slipped during Asian trade however it did stabilize to hold at similar levels to Friday’s close. The US government shutdown continued, further delaying domestic data releases as FX market moves were largely contained. The USD rose slightly against the Aussie and Kiwi, with AUD/USD opening this morning a touch over 0.72 whilst the NZD is currently buying 0.6829 US cents. In contrast, the greenback opens lower against the Euro and Sterling, with EUR/USD and GBP/USD opening at 1.1472 and 1.2891 on Tuesday.
We did hear some Fedspeak from FED Vice chairman Richard Clarida on Monday who said that he did not see a recession on the horizon. He reiterated that the December rate hike was the right decision and commented that the Fed can now be ‘very patient’ in 2019, taking monetary policy decisions on a meeting by meeting basis.
Looking ahead to Tuesday’s session, traders will be looking to today’s US manufacturing and PPI numbers for any indication of an economic slowdown in the domestic economy. This will be an important read in the lead up to Wednesday’s US retail sales numbers and before Fridays industrial and manufacturing production data.
AUD / EUR
Expected Range: 0.6220 – 0.6350
The Euro offered little through trade on Monday fluctuating within a 25 point trading range despite a broader sell off of risk assets. When compared against the USD the common currency remains firmly range bound having struggled to break key resistance levels amid a wider softening of USD. The recent greenback correction has allowed the Euro to break off 3 month lows, but persistent softness in key growth indicators have plagued expectations for monetary policy change while political uncertainties across key counterparties have only added to the broader bearish sentiment.
Focus today turns to EUR/AUD cross with values testing key support lines through the last week. Having fallen below the 100 and 200 hour moving average a firm bearish channel has opened and raises the possibility of a break below the 100 day moving average. A break could signal a deeper correction is imminent as risk appetite continues to improve opening up AUD upside and a move back above 0.63/0.6350.
With little headline date available to drive direction attentions remain squarely affixed to ECB presidents Draghi’s commentary Wednesday as the primary macroeconomic driver of direction.
AUD / CAD
Expected Range: 0.9420 – 0.9620
There was little price action for the Canadian Dollar overnight as it saw minimal change in overnight movements against the greenback. Opening the week at 1.3260, it was a tight trading range of forty pips for the Loonie seeing a 0.1% change on the day lower.
The CAD was initially weaker as the USD/CAD hit 1.3297 following continued weakness in Brent crude oil prices, dropping 2% and West Texas Intermediate futures prices hitting $51 a barrel.
With little data domestically on the horizon, the Canadian dollar will take its cues from the release of PPI figures in the United States overnight as the USD/CAD opens this morning at 1.3275.
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