Greenback rally stalls ahead of heightened risk period

AUD / USD

Expected Range: 0.7380 - 0.7520

The Australian dollar paused for a break yesterday having rallied the week prior following an increase in commodity prices. The local unit traded between 0.7435 and 0.7490, a near-term resistance level. Private New Home Sales fell 8.5% in October according to the Housing Industry Association, this was the lowest level of sales since July 2014 but down on 4.9% this time last year. The data did very little to the currency and so the Aussie took most of its direction from offshore data released from the worlds largest economy. Third-quarter GDP data reported a strong reading alongside U.S Consumer Confidence Index reporting a rise this month versus the previous month. The upbeat data does add optimism over the outlook for the U.S economy and for the Federal Reserve to move next month on an interest rate hike. The Aussie has fared well elsewhere, rising against the JPY to stay near a 7-month high whilst political risk have kept AUD/EUR in check. Today we see the release of Building Approvals and Private Sector Credit.

NZD / USD

Expected Range: 0.7020 - 0.7220

The New Zealand dollar railed through trade on Tuesday advancing back through 0.71 U.S cents as the steam appears to be running out of the recent USD rally. Having touched 14 year highs last week the Greenback has suffered a consolidated sell off as investors assume profits and correct positions ahead of a risk filled December. With attentions now turning to the Federal Reserve’s December monetary policy meeting markets appear reluctant to extend the recent rally and look to be consolidating positions rather than chasing a complete correction. U.S treasury yields remain favourable and demand for the USD is expected to continue through the short to medium term as investors adjust to a Trump presidency and the possibility of redirected capital flows. 

GBP / AUD

Expected Range: 1.6500 - 1.6800

During Tuesday’s session, the Great British Pound continued to clawed back some recent gains on the USD. The GBP / USD cross traded to a high of 1.2525. Momentum remains positive for GBP. We expect support to hold on moves approaching 1.2304 while any upward push will likely meet resistance around 1.2675. The pair is currently trading at 1.2490. A quiet session expected locally with little to no economic data due. All attention will be on Thursday’s Manufacturing PMI in November which is forecast to rise to 54.5 from 54.3 previously. Construction PMI, out on Friday, is forecast to fall to 52.3 from 52.6 previously.

USD, EUR, JPY

The U.S Dollar enjoyed mixed fortunes through trade on Tuesday advancing early before relinquishing gains into the daily close. Stronger than anticipated preliminary third quarter GDP numbers and an uptick in Consumer confidence helped bolster demand for the world’s base currency and pushed the USD through 113 JPY while the Euro fell back through 1.06. As the Greenback approached fresh highs the rally began to run out of steam and investors appeared to take the opportunity to consolidate profits and correct positions ahead of a busy and risk filled December. Falling back below 112.50 JPY the USD largely gave up its earlier gains while the Euro rallied through intraday highs to touch 1.0650 at time of writing. With attentions now turned to prelim non-farm payroll numbers and a raft of European macroeconomic drivers investors will be keenly attuned to fluctuations in sentiment. The current trend suggests the recent USD sell off is no more than a consolidation of recent rallies and there is still plenty of upside potential, however markets will be wary of extending positions ahead of the Fed’s December rate hike and key European referendums and elections.