11th February 2020 - AUD/USD remains under pressure as it trades at it lowest since March 2009


Good morning


OVERNIGHT DATA AND HEADLINES

- No major data to report.


- FOMC member Bowman said the economic backdrop looks "very favorable", the economy should continue to grow at a moderate pace, with low unemployment, and an expected rise in inflation to its 2% target - all reflecting the key messages of the most recent FOMC policy statement. There was no indication that coronavirus had caused any material change in the economic outlook and policy stance. Daly said a mindset change was required, where inflation is a “bit above the target”, rather than below.


- Updated coronavirus statistics show confirmed cases total 40,655 worldwide (40,199 in China), of which 910 have died (908 in China) and 3669 have recovered.


CURRENCIES

- The US dollar index is up 0.2% on the day, and at a four-month high.

- EUR fell from 1.0950 to 1.0909 – a four-month low.

- USD/JPY ranged between 109.65 and 109.85.

- AUD fell from 0.6707 to 0.6672, remaining close to the decade low of 0.6660 set yesterday.

- NZD fell from 0.6410 to 0.6382 – a three-month low.

- AUD/NZD rose from 1.0440 to 1.0468 – a two-month high.


TREASURIES

- US 2yr treasury yields fell from 1.41% to 1.37%

- 10yr yields from 1.60% to 1.55%

- Markets are pricing a 10% chance of easing at the next Fed decision on 18 March, and a terminal rate of 1.12% (vs Fed’s mid-rate at 1.63% currently).


COMMODITIES

- Brent crude oil fell 2.1% to $53

- Copper fell 1.3%

- Iron ore fell 1.4% to $82

- Gold rose 0.3%.


ECONOMIC DATA TODAY

- Australia: Another robust gain for housing finance is expected in December, circa 1.6%. Demand for loans from owner occupiers has been driving growth in recent months and this is expected to continue in December. Meanwhile, the NAB business survey is likely to report another weak reading for conditions and confidence in January.


- UK: The monthly GDP data points to a contraction in Q4, -0.1%.


- US: Fed Chair Powell’s testimony will be the main event, with a particular focus on any discussion of the risks. Bullard, Quarles, Kashkari and Daly are also due to speak. NFIB small business optimism and JOLTS data are due too.


AUD THOUGHTS


AUD/USD erases majority of early gains, trades around 0.6675


US Dollar Index closes in on 99 mark.

Annual inflation in China rose to 5.4% in January.

Coming up: Home Loans and NAB Business Confidence data from Australia.


The AUD/USD pair staged a rebound at the start of the week and rose above the 0.6700 handle but struggled to preserve its bullish momentum and retraced a large portion of its daily gains. At the moment, the pair is up 0.05% on the day at 0.6675.


The National Bureau of Statistics of China on Monday reported that that inflation, as measured by the Consumer Price Index, rose to 5.4% on a yearly basis in January from 4.5% in December and came in higher than the market expectation of 4.9%. Nevertheless, the People's Bank of China (PBOC) announced that injected 900 billion yuan via repo operations into the economy to negate the impact of the coronavirus outbreak on Monday to help the China-proxy AUD gather strength.


DXY extends rally ahead of Powell testimony

On the other hand, the greenback continued to outperform its major rivals and forced the pair to reverse its direction. Despite a lack of macroeconomic data released from the US, the US Dollar Index climbed to its highest level since October at 98.88 and now remains on track to close the sixth straight trading day in the positive territory. In the early trading hours of the Asian session on Tuesday, Home Loans and National Bank of Australia's Business Confidence and Business Conditions data will be looked upon for fresh impetus.


Later in the day, FOMC Chairman Jerome Powell will be testifying before the Committee on Financial Services of the Congress after delivering the Semi-annual Monetary Policy.


TECHNICAL COMMENTARY

- AUD/USD remains under pressure while the price hovers near its lowest since March 2009.

- The level to beat for bears is the 0.6673 support


AUD/USD daily chart


The Aussie remains under selling pressure near one-decade lows. The sellers will most likely keep pressuring the 0.6673 support in order to extend losses towards the 0.6645 and 0.6617 price levels. Bullish pullbacks could find resistance near the 0.6693, 0.6716 and 0.6735 levels, according to the Technical Confluences Indicator.


Resistance: 0.6693, 0.6716, 0.6735

Support: 0.6673, 0.6645, 0.6617




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