Daily currency market report

Daily Currency Market Report – 30th July 2014


The market in brief:
• AUD and NZD open markedly lower
• Australian New Home Sales pick up
• UK Net Lending To Individuals drops
• US Consumer Confidence rallies


Market moving events for the next 24 hours:
• NZ Building Consents
• German inflation
• US ADP Non-Farm Employment Change
• US GDP
• US Federal Reserve’s FOMC meet

AUDUSD:
The Australian Dollar has dropped 40 odd points over the last 24 hours, despite an upturn in New Home Sales. The move has come as tensions remain in the Ukraine and Middle East, US Consumer Confidence strengthens and as a report in the Australian press suggests there may be one final interest rate cut due to the high dollar. Looking ahead and we are now into the business section of the week with economic data set to hit the tapes thick and fast. The Fed’s FOMC meet is of course the main focus over the next 24 hours and very likely to cause some movement. On today’s charts we are completing a pennant formation that has support for exporters to target just 20 points below and resistance 80 points above. Longer term and the picture is becoming a little less certain. Our ultimate target sits USD 2.5 cents above, but we may well have a healthy USD 1 cent correction lower first. Either way, both are great levels for hedging future exposure given the current climate of uncertainty.

AUDEUR:
This pair closes with only slight losses on the day. The Aussie did fall away through London trading but has recovered towards the end of the New York session as news of new EU sanctions on Russia hit. German inflation is key this evening and will be precursor to tomorrows Euro Zone inflation print. Of course any further statements from EU or Russia will also dictate direction. On the charts we are stuck in a tight range with momentum building for a sizeable move. We’d suggest placing orders sooner rather than later.

AUDGBP:
Mixed data of medium to low importance meant the Pound was not able to properly trend and this pair has closed flat. UK Manufacturing data on Friday is the only data release of note, so domestic factors take on more importance until then. As per yesterday’s report, our favoured break of the top of the downward channel came to fruition however we only see sideways action for the next 48 hours. Longer term the downward trend is very much intact and we can see this holding and a push lower coming over the next few weeks /months.

AUDNZD:
Our technical resistance target level of the longer term upward channel, that we set last month, has finally been hit. As expected Fonterra announced 14% reduction in its forecast payout to famers and this saw the final 70 point push to levels not seen in the Tasman cross since late last year. Longer term and the upward channel is in place, but nonetheless resistance is strong here and it’s hard to forecast much in the way of near term gains. AUD sellers may want to look at forward cover for the next 1-3 months for at least a good size of any expected exposure.

Quote of the day: A lack of transparency results in distrust and a deep sense of insecurity. The Dalai Lama


Alternative Currency Hedging: Ask us about a great alternative to traditional forward contracts that give the ability to cover at attractive levels, but with the flexibility to walk away if the rate improves or if not required.

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Jim Devonport
Corporate & High Net Worth Client Manager



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