Daily currency market report

 COMPASS DAILY CURRENCY MARKET REPORT

The market in brief:

·      AUD closes “the gap” then retraces

·      NZD also closes lower after an Asian rally

·      NZ Retail Sales improve sharply

·      Australian Motor Vehicle Sales drop

·      Japanese GDP confirms a recession

·      ECB President suggests more bondpurchases

·      US Industrial Production lower

·      US Capacity Utilization rate drops

Market moving events for the next 24 hours:

·       RBA MonetaryPolicy Meeting minutes

·       RBA GovernorStevens speaks

·       UK Inflation

·       GermanEconomic Sentiment

·       US ProducerPrices

·      NZ Global Dairy Trade prices

AUDUSD: As has wehave been continuously forecasting over the last couple of weeks the AustralianDollar rallied to close “the gap” that had formed 2 weeks ago, upon thatweekends release of disappointing Chinese data. The Asian session highs were asgood as it got for importers and the currency was pulled lower with large selling;so congratulations to those that heeded our warning to place orders up there.This morning sees the release of minutes from the most recent RBA MonetaryPolicy Meeting, followed by a speech from the central bank Governor. We do notexpect him to put any support under the currency so suggest the overnight highsmay not be broken just yet. Focus is firmly on tomorrow nights Fed Reserve FOMCminutes that should also ensure the range is held in the short term.

AUDEUR: A slightlydifferent story for this pair as we traded a tight range. The weaker AustralianDollar elsewhere was matched with another bout of Euro selling on the back of EuropeanCentral Bank president Draghi’s comments that they are considering further bondpurchases. The important ZEW German Economic Sentiment Survey is due thisevening and expected to how an improvement. With that and an expected dovishRBA, we cannot see too much upward traction here especially as 2 month oldtechnical resistance sits just above.

AUDGBP: The Poundrecovered some of its recent losses as exporters reacted to levels not seen forat least two months. UK CPI data is set to come tonight and should confirm therate of inflation is around 1.2% and well below the Bank of England’s 2%target. Our attention is also towards tomorrow’s announcement of the votes theMonetary Policy Committee made on interest rates and the Asset PurchaseFacility. Any change from the 2-0-7, (for-neutral-against), should help createvolatility, however we feel the overall trend should still be upward.

AUDJPY: The Yen’sweakness continues and has the Aussie touching fresh highs as the release ofJapanese GDP shows the country falling into recession. The Bk of Japan releasestheir monetary policy statement tomorrow, so the upward move may well be muteduntil then. In fact exporters may well get their chance to jump on board as themarket should tread water, if not retrace lower, with expected importerselling.

AUDNZD: The TasmanCross has actually pushed lower as NZ Retail Sales improved sharply, whilst theAussie Dollar was held back by the recent comments of intervention by the RBA.NZ global dairy price data is released overnight and should show a fall andtherefore give this pair some support, however should we see a break then a sensibletarget for AUD buyers with NZD receipts sits at support that has held sinceJuly, 75 points below. Importers can target initial resistance NZD 1 centsabove and longer term the recent highs NZD 2.5 cents away.

Thought forthe day: No fine work can be done without concentration and self-sacrificeand toil and doubt. Max Beerbohm

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