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Aussie struggles to find direction following downward correction

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AUD – Australian Dollar

The Australian opens this morning having slipped back below 0.69 US cents. With little macroeconomic data on hand to drive direction throughout the domestic session the AUD found support in late in the day as European markets came online. Buoyed by recent improvements in risk appetite the AUD touched intraday highs at 0.6932 before a suite of stronger than expected US data sets forced a downward correction. An uptick in US retail sales led improvements in manufacturing and a downturn in unemployment claims, easing pressure on the Federal Reserve and its monetary policy setting committee to lower interest rates. The AUD touched session lows at 0.6987 and has struggled to break back above 0.69 since.

Attentions now turn to Chinese GDP, industrial production and unemployment data for direction through Friday and into the weekly close. With the Yuan enjoying support in the lead up to and wake of the phase one trade deal a strong read across the aforementioned macroeconomic indicators could prompt further gains, bolstering risk appetite further and dragging the AUD higher as a proxy. We continue to watch key support and resistance handles at 0.6850 and 0.6930.

Key Movers

The US dollar index advanced through trade on Thursday, driven largely by a downturn in Euro/USD. Improvements across US retail sales, Manufacturing, Employment claims and the housing market all helped reduce pressure on the Fed to lower interest rates and highlighted the large gulf between US and European monetary policy options. The Euro tested key support handles and the 200day moving average touching 1.1130.

The Great British Pound edged higher on the day edging back through 1.3050 before stalling on moves approaching 1.0390/1.31. With short term resistance firmly entrenched at these levels our attentions turn to domestic retails sales data a possible catalyst to force a break. A soft read will only affirm recent poor readings across a suite of economic indicators and add mounting pressure on the Bank of England to lower interest rates as earlier as January 30.

Expected Ranges

AUD/USD: 0.6850 – 0.6930 ▼

AUD/EUR: 0.6180 – 0.6230 ▲

GBP/AUD: 1.8620 – 1.9180 ▲

AUD/NZD: 1.0350 – 1.0450 ▼

AUD/CAD: 0.8950 – 0.9050 ▼


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