16th July 2019 - AUD/USD steadies above 0.70, focus shifts to RBA minutes


Good Morning,


Market Headlines

- US interest rates fell slightly amid depressed expectations of the US quarterly company reporting season which commenced yesterday. The US dollar is slightly higher, while the S&P500 made a fresh record high but is currently unchanged.


- US 2yr treasury yields fell from 1.86% to 1.83%, while 10yr yields fell from 2.14% to 2.09%. Markets continued to price 30bp of easing at the 31 July meeting.


- Australian 3yr government bond yields fell from 0.98% to 0.96%, 10yr yields from 1.47% to 1.42%. Markets continued to price only a 15% chance of an RBA rate cut in August.


- Brent crude oil fell 1.6% to $66.20 as the Gulf of Mexico hurricane receded.


Currencies

- The US dollar index is up 0.2% on the day.

- EUR fell from 1.1285 to 1.1255.

- USD/JPY ranged sideways between 107.80 and 108.10.

- AUD nudged higher, from 0.7025 to 0.7038, helped by yesterday’s strong Chinese data.

- NZD initially rose to 0.6735 – a three-month high before consolidating around 0.6715.

- AUD/NZD initially dipped to 1.0447 before bouncing to 1.0475


AUD Thoughts

AUD/USD steadies above 0.70, focus shifts to RBA minutes


- Upbeat data from China help antipodeans gather strength.

- US Dollar Index inches higher toward 97 handle on Monday.

- RBA is scheduled to publish the minutes of its July meeting on Tuesday.


The AUD/USD pair started the week on a positive note as the upbeat macroeconomic data releases from China allowed the AUD to gather strength. After advancing to an 11-day high of 0.7038, the pair has gone into a consolidation phased and was last seen trading at 0.7036, adding 0.38% on a daily basis.


The data from China revealed that the real GDP in the second quarter expanded by 1.6% on a quarterly basis to surpass the market expectation of 1.5%. Moreover, retail sales in China increased by 9.8% and industrial production grew by 6.3% on a yearly basis in June with both readings coming in above analysts' estimates.


Today, markets will be waiting for the RBA to publish the minutes of its July meeting, at which the bank decided to cut its policy rate by 25 basis points, the pair stayed in its daily range. US June retail sales numbers will also be closely watched this evening.


Technical Outlook

Unless successfully clearing 0.7048/52 area, comprising early-April lows and highs marked since May 07, chances of the quote’s pullback to 100-day exponential moving average (EMA) level of 0.7018 and then to 0.7000 can’t be denied. However, sellers targeting 0.6980 and 0.6910 can sneak in if prices sustain below 0.7000 mark.


Meanwhile, a sustained break of 0.7052 enables buyers to target late-April high near 0.7070 ahead of aiming 0.7110 and 0.7130/35 resistances.


Event Risk Data Today

- NZ: Q2 CPI is expected to have risen by 0.6% qoq, 1.7% yoy – in line with RBNZ forecasts. Much of the Q2 rise is due to higher fuel prices.


- Australia: the RBA minutes will provide further detail around the decision to cut rates 25bps at back-to-back meetings.


- Euro Area: Jul ZEW survey of expectations is released.


- UK: May ILO unemployment rate is anticipated to hold at 3.8%


- US: Jun retail sales are anticipated to rise 0.1% with the control group up 0.3%, a return to a more moderate albeit still solid pace following the rebound seen over the previous three months. Jun industrial production is expected to eke out a 0.1% gain with manufacturing under pressure globally. Jul NAHB housing market survey is seen to hold a positive level at 64. Fed Chair Powell gives a speech titled “Aspects of Monetary Policy in the Post-Crisis Era” at a Bank of France event. Other Fedspeak includes Bostic and Bowman at Fed Listens events, Kaplan at the NABE conference, and Evans in Chicago.


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