- The tight ranges in currencies continued overnight with the AUD/USD managing a meagre 28 points, USD/JPY 36 points and EUR/USD 35 points. These narrow ranges were contradictory to the movement in other asset classes where the US 2yr yields fell 5bps, oil rallied 2.3% and the S&P 500 futures rallied 1% out of yesterday’s lows.
- Oil spiked higher in early European trade as news services reported that two Saudi oil tankers were attacked in the Gulf of Oman. No crew were harmed with the US Navy on hand to help with the rescue. Oil was 3% higher as equities opened in the red
- US weekly jobless claims printed at 222k, up modestly and slightly above expectations of 215k with continuing claims largely unchanged at 1.695 mio which was also above expectations of 1.660 mio. Across the border, Canadian New house Prices were flat MoM in April and up 0.1% YoY, both numbers matching expectations.
- The US dollar index is unchanged on the day.
- EUR slipped from 1.1300 to 1.1270.
- USD/JPY ranged sideways between 108.15 and 108.55.
- AUD preserved yesterday’s jobs data-led losses, ranging between 0.6902 and 0.6920.
- NZD slipped further, from 0.6575 to 0.6556.
- AUD/NZD retraced yesterday’s decline, from 1.0505 to 1.0540.
AUD Thoughts/Technical Outlook
-Traders await data from the key customer to validate RBA’s rate cut fears.
- Souring US relations with China and Iran also questions trade sentiment.
Having witnessed another day of losses piled due to heightened expectations of the RBA’s rate cut, the AUD/USD pair shows little moves near 0.6920 as investors await China data during the early Asian session on Friday.
The Reserve Bank of Australia’s (RBA) increased emphasis on the unemployment rate triggered fears of another rate cut by the Aussie central bank after the job data rose more than expected 5.1% to 5.2% during May.
Bears also gave due importance to the US-China trade stalemate while heavy risk tone due to rising concerns of a Fed rate cut and political tension between the US and Iran also weighed on the prices.
The global barometer of risk sentiment is the US 10-year treasury yield that slipped more than three basis points (bps) to 2.093% by the time of writing.
China’s May month retail sales and industrial production are next in the pipeline for Aussie traders to watch. Recent data from the dragon nation have been upbeat but could do little to boost the Antipodeans. However, a likely increase in retail sales to 8.1% from 7.2% coupled with a rise in industrial production growth to 5.5% from 5.4% on a yearly basis might not refrain from pleasing the traders. On the contrary, disappointment from the data dump is likely to cause more losses than otherwise due to prevailing pessimism.
Technical levels to watch for
On the technical front the AUD went to late-March bottoms around 0.6900, a break of which opens the door for its further south-run to 0.6860 and then to 2016 low near 0.6830.
In a case where prices take a U-turn, 0.6940, 0.6960 and 50-day simple moving average around 0.7010 could challenge the pullback.
Event Risk Data Today
- NZ: Manufacturing PMI surprisingly rose in April, remaining in expansionary territory.
- China: May NBS monthly data release will provide an update on retail sales, fixed asset investment and industrial production.
- US: May retail sales are expected to rise 0.6% following a 0.2% decline in Apr on the back of a jump in Mar. Core group sales are seen to rise 0.4% after a flat read in Apr.