• AUD closing in on 0.80 US cents as Democrats wrest control of the Senate
    on January 7, 2021 at 12:00 am

    AUD - Australian Dollar The Australian dollar continued its upward extension, pushing through 0.78 US cents on Wednesday amid broader US dollar weakness following early results in the Georgia senate race. The AUD capitalised on reports that the Democrats appeared likely to win both races after Raphael Warnock beat Republican incumbent Kelly Loeffler and Jon Ossoff appeared likely to prevail over David Perdue. The blue wave sees Democrats wrest control of both arms of government opening the door to increased fiscal stimulus and a burgeoning deficit. Markets anticipate sustained USD weakness in the wake of these results. Increased COVID-19 aid within the US should help drive the global recovery propping up the AUD and other risk assets, while a falling bond market and widening trade and budget deficit will likely weigh on the world’s base currency. Having touched intraday highs at 0.7820 the Australian dollar edged back below 0.78 into this morning’s open as markets looked to move toward haven assets following reports Trump supporters had forced themselves into the Capitol building in a last-ditch attempt to thwart the confirmation of Election results. As we look ahead our attentions now turn to the next point of psychological resistance; 0.80 US cents. With the Australian economy relatively free from the constraints of COVID-19 and positive sentiment continuing to outweigh near term headwinds we would anticipate little in the way of resistance in chasing down this handle. While there is scope for a short-term reprieve on US dollar weakness, the downturn is still very much intact, and we expect sustained softness through the medium term allowing the AUD to extend gains through Q1. Key Movers The US dollar tested three-year lows through trade on Wednesday as Democrats appeared on the cusp of winning both senate seats in Georgia and wresting control of the house and senate, paving the way for increased stimulus and deficit. The dollar index hit its lowest level since March 2018 and looks poised to break below 89 having touched 89.206. The dollar then managed to claw back some of the day’s losses as demand for risk assets faltered following reports protesters in Washington D.C had stormed the capital in a last ditch attempt to overrun the confirmation and certification of election results. The Euro having eyed a move above 1.2350 slipped back to 1.2310 while Sterling shifted off levels approaching 1.37 to slip back below 1.3550. The pound has struggled to extend gains beyond resistance at 1.37 as investors square positions amid concerns new COVID-19 restrictions will further derail the near-term recovery. Bullish bets have faltered, or at the very least slowed, through the last 7 days as expectations new national lockdowns will knock a further 10% off GDP forecast and the Bank of England will be forced to ease monetary policy before the middle of the year. We anticipate a period of consolidation as markets remain cautious as to the outlook with markets looking to the effects of lockdown measures for further guidance. Expected Ranges AUD/USD: 0.7720 - 0.7850 ▲ AUD/EUR: 0.6280 - 0.6350 ▲ GBP/AUD: 1.7280 - 1.7580 ▼ AUD/NZD: 1.0630 - 1.0750 ▼ AUD/CAD: 0.9820 - 0.9930 ▲

  • AUD surges on coat tails of Yuan revaluation
    on January 6, 2021 at 12:00 am

    AUD - Australian Dollar The Australian Dollar rallied back through 0.77 US cents Tuesday, pushing through the December 31 high and resistance at 0.7750. Having slipped below 0.7650 in the latter hours of trade on Monday, the AUD regained the upper hand late in the domestic session before rallying strongly overnight and in the lead up to this morning’s open. Having tested resistance at 0.7740/50, the AUD surged upward after China’s central bank, the PBOC, elected to set the official Yuan midpoint value at 6.4760, one percent higher than the previous fix and the largest single adjustment since China moved away from a fix peg valuation in 2005. The Australian Dollar is often seen as proxy to the Yuan, and it certainly benefited from the PBOC’s aggressive correction, advancing to mark fresh highs at 0.7779. Our attentions turn now to the Georgia State senate run off for near term direction. A democrat win in both races would mean a change in the balance of power and afford democrats control of both the house and senate, a vitally important achievement in this era of partisan politics. With analysts and investors still at odds as to the likely result, we see short term AUD opportunities should US Dollar weakness continue. Watch resistance on approach to 0.78 US cents with a break above this threshold opening the door for sustained upside. Key Movers The Dollar recovery didn’t last long with markets shying away from the world’s base currency following policy action from the PBOC and a broader correction in risk demand. Stocks advanced through trade on Tuesday as markets chased risk assets higher following the People’s Bank of China’s adjustment to the Yuan midpoint value. Added pressure came on heels of rising inflation expectations and a jump in oil prices, driving the USD lower against most major counterparts. Having fallen almost half a percent, the Dollar index now sits at levels not seen since April 2018 and appears poised to continue the 7% depreciation suffered though 2020. The Euro and Japanese Yen both advanced against the dollar while Sterling bounced between 1.3560 and 1.36 before breaking higher leading into this morning’s open. While the GBP has managed to hold onto gains won in the wake of the 11th hour Brexit trade deal rising COVID-19 case numbers and calls for a 3rd nationwide lockdown could curb gains beyond 1.37 in the near term. Expected Ranges AUD/USD: 0.7640 - 0.7820 ▲AUD/EUR: 0.6260 - 0.6350 ▲GBP/AUD: 1.7380 - 1.7720 ▼AUD/NZD: 1.0650 - 1.0750 ▲AUD/CAD: 0.9770 - 0.9890 ▲

  • Souring risk sentiment forces AUD to give up gains
    on January 5, 2021 at 12:00 am

    AUD - Australian Dollar The first trading session of the year prompted whippy trade and price action as the AUD failed to hang onto gains above 0.77 US cents. Spurred by a positive undercurrent of risk demand the AUD rallied through the domestic session to touch intraday highs at 0.7740, , marginally short of last week’s 21 month high With the USD under pressure the AUD appeared set for a challenge above resistance at 0.7750 and an assault on 0.78 US cents before profit taking and a souring in risk sentiment prompted a shift in fortunes. Markets unwound gains overnight, forcing the AUD back below 0.77 and 0.7650 as mounting COVD 19 case numbers, vaccine rollout concerns and the upcoming Georgia Senate run off spooked investors. We anticipate the AUD will continue to enjoy sustained upside through the first quarter as US fiscal policy remains accommodative and optimism for a H2 economic rebound remain intact. That said, there are both short- and medium-term risks to this view. While the market continues to ignore near term fundamentals and instead trades on optimism for a better 2021 there is scope for the AUD to continue its upward advance, but with the pandemic showing little signs of slowing and a widespread immunisation program still 3-6 months away short-term headwinds may slow the pace of appreciation through the weeks ahead. Key Movers Having been driven to 21 month lows through the early part of the new year’s first trading session the US dollar rebounded overnight, recouping losses to close almost two tenths of a percent higher on the day. The worlds base currency plunged to lows not seen since April 2018 as record low interest rates, a burgeoning deficit and optimism the global economy will bounce back in 2021 prompted a run on the dollar and push toward risk assets. However, as the dollar appeared sset to ring in the new year with another sharp downturn, investors appeared spooked by short term headwinds, giving up risk asset gains on a souring in risk sentiment. While the medium term forecast remains negative the specter of the pandemic and upcoming Georgia senate run off pose as significant risk events through the days and weeks ahead which could lend some short term support to the embattled USD. Both the Sterling and Euro gave up early gains, trading down on the day. The single currency tested a break above 1.23 before slipping back below 1.2250 while Sterling fell sharply. Having touched 1.37 the Pound came under pressure as reports tighter lockdown measures will be introduced spooked investors, forcing cable back below 1.3575 to touch lows at 1.3557. With investors appetite for risk souring throughout the day the Japanese Yen enjoyed gains against most counterparts, up 0.05% against the USD despite concerns rising COVID19 case numbers may prompt Prime Minister Suga to introduce a state of Emergency in Tokyo. Out attentions remain with pandemic and the broader risk narrative. Expected Ranges AUD/USD: 0.7630 - 0.7750 ▼AUD/EUR: 0.6190 - 0.6310 ▼GBP/AUD: 1.7550 - 1.7820 ▼AUD/NZD: 1.0650 - 1.0750 ▼AUD/CAD: 0.9720 - 0.9820 ▼

  • Aussie breaks through 0.77 to reach levels not seen since 2018
    on January 4, 2021 at 12:00 am

    AUD - Australian Dollar The Australian Dollar ended 2020 breaking through yet another yearly high, peaking at 0.7741 before taking its foot off the gas for New Year Celebrations. The Aussie opens in 2021, slightly softer at 0.7709 but still amongst the top performers in 2020 after posting gains for seven consecutive weeks to reach levels not seen since April 2018. With little on the economic calendar to drive momentum, the Aussie continued to trade primarily on the rapidly weakening US Dollar, positive risk sentiment and COVID headlines. Moving into 2021, the Aussie is expected to continue the current trend with little on the economic calendar to digest to start the new year. Key Movers The US Dollar continued to weaken throughout the close of 2020, softening against most of the majors. The impetus for the falls continued to be broader macro-economic in nature in the absence of any economic data. With the United States economy expected to falter in its recovery, COVID still running rampant, political risks expected to rise and the Federal Reserve printing money, the US Dollar finds itself under continued, sustained downward pressure. Most of the majors have benefited from the Greenbacks erosion to some degree but the Kiwi, Sterling and Aussie are amongst the top performers. Expected Ranges AUD/CAD: 0.9748 - 0.9896 ▲ AUD/EUR: 0.6252 - 0.6346 ▲ GBP/AUD: 1.7600 - 1.7865 ▼ AUD/NZD: 1.0631 - 1.0792 ▲ AUD/USD: 0.7642 - 0.7757 ▲

  • AUD regains some of its losses
    on December 24, 2020 at 12:00 am

    AUD - Australian Dollar The AUD started to regain some of its losses after dipping below the 0.75 floor earliest this week, to open at 0.7577 against the USD this morning. The USD climbed throughout the week as market sentiment softened, and demand for safe-haven currencies such as the USD being the primary driver. It is a quiet week up ahead for the Aussie with no major macroeconomic news being released. The 25th and 28th of December are Bank Holidays. Please note that due to the holidays, after today the Daily Currency Update will conclude for this year and recommence on the 4th of January 2021. Key Movers US final GDP data released yesterday came back positive at 33.4% compared to a forecast of 33.1%. While released quarterly, this is reported in an annualised format and shows the yearly change in the inflation-adjusted value of all goods and services by the economy. Canada also released their GDP data about midnight last night. This also came back positive at 0.4% compared to a forecast of 0.3%. GDP data is the broadest measure of economic activity and the primary gauge of the economy’s health. We can expect some major movement in the near future when the Organisation of Petroleum Exporting Countries (OPEC) and Joint Ministerial Monitoring Committee (JMMC) meet up on the 4th of January discussing a range of issues pertaining to energy markets, and how much oil to produce. Expected Ranges AUD/CAD: 0.9650 - 0.9885 ▲AUD/EUR: 0.6120 - 0.6400 ▼GBP/AUD: 1.7480 - 1.8130 ▼AUD/NZD: 1.0530 - 1.0795 ▲AUD/USD: 0.7475 - 0.7710 ▲

  • Weekly market wrap-up
    on April 29, 2019 at 12:00 am

    Australian Consumer Price Index for Q1/19 came in weaker than expected, falling well below the RBA’s 2-3% target range. The AUD dropped temporarily below the important 0.70 level but then managed to bounce back. The pace of inflation has weakened noticeably which is adding to the case for easier monetary policy. This is making the RBA meeting on the 7th May and RBA Statement on Monetary Policy on the 10th a lively event to keep a look out for. Oil rallied on the news that the US would not renew its oil sanction waivers that allow countries to buy Iranian oil for 5 nations which included China, India, Japan, South Korea and Turkey. Currencies of oil importing nations such as INR and TRY suffered on the headline while currencies of exporting oil nations such as CAD and NOK strengthened. On Friday, Oil futures dropped 2.9% following mixed Headlines from Russia and US leaders. The BoC left rates unchanged at 1.75% for the fourth time, as expected, maintaining its dovish tone as the economy faces a slowdown. Their GDP outlook for 2019 dropped to 1.2% from 1.7%, and to around 2% in 2020. USDCAD spiked to 1.3522 at the release of the headline. Governor Poloz afterwards emphasised patience and reiterated that the next move in rates is likely to be a hike than a cut, which help the USDSCAD fall back below the 1.35 handle. Strong US data propelled the Greenback to increase +0.7% versus the Euro and the Loonie, +0.6% versus the Sterling, and +1.5% versus the Aussie dollar. US domestic GDP came in at 3.2%, when the expectation was 2.6%. Additional data showed that the number of Americans filing for unemployment benefits fell to its lowest level in almost 50 years. Furthermore, the Core Durable Goods Orders rose by the most in eight months in March, showing surprising strength. The USD Index lost some ground at the end of the week as market participants realised that 1.7% of the 3.2% GDP increase came from inventory accumulation and net exports (sparked by a big -3.7% drop in imports). Japan’s Industrial production shrank at its fastest level since 2015, slipping 0.9% on the month for March as exports slumped. This is a leading indicator for GDP which probably shrank in the first quarter. Governor Haruhiko Kuroda launched a radical program to reflate prices nine years ago, however, the BOJ now projects that it won't accomplish its 2 percent inflation target at least through March 2022. The Japanese Yen was the best performer within the major currencies last week; it rallied 0.3 percent versus the US dollar and 1.8 percent versus the Aussie dollar.