17th June 2019 - AUD January's flash-crash low exposed

Good Morning,

Market Headlines

- US equities fizzle out on Friday, but still end higher on the week

- China’s data underwhelms while US data mostly beat expectations

- US data boost the big dollar and front end UST yields

- NZD the big underperformer end week sub 65c while AUD closes the week with a 68c handle

- Low EU and US Inflation Expectations set the scene for ECB and Fed this week


- The US dollar index closed up 0.6% on the day, for a total 1.1% gain last week.

- EUR fell from 1.1290 to 1.1203.

- USD/JPY rose from 108.15 to 108.60.

- AUD fell from 0.6905 to 0.6961 – the lowest since January.

- Underperformer NZD fell from 0.6540 to 0.6489 – a three-week low.

- AUD/NZD rose from 1.0540 to 1.0590

AUD Thoughts/Technical Outlook

The Australian dollar fell Friday against the greenback to its lowest since January´s flash-crash, touching 0.6860 to settle a handful of pips above this last. Dollar's strength against its commodity-linked rival was exacerbated by dismal Chinese data released at the beginning of the day, as Industrial Production in the country rose in May by less-than-anticipated, up by 5.0% YoY. Retail Sales in the same period were up by 8.6%, better than the market's forecast of 8.1%, but fell short of supporting the Aussie. The poor performance of worldwide equities added pressure on the commodity-linked currency, alongside persistent trade tensions. There are no macroeconomic releases scheduled in Australia or China this Monday.

The AUD/USD pair is technically bearish as it accelerated its decline after breaking below the 20 DMA Thursday, technical indicators entered negative territory, retaining their firm downward slopes and at their lowest for this June, supporting further declines ahead. In the shorter term, technical indicators settled at extreme oversold territory having barely bounced, while the 20 SMA offers a strong bearish slope well above the current level and above the larger ones, keeping the risk skewed to the downside. A break below 0.6820 a long-term static support level, should imply a mid-term bearish continuation

Technical levels to watch for

A sustained break of 0.6860 becomes pre-requisite for the bears to aim for 2016 lows around 0.6830 and then aim for January month’s flash crash bottom near 0.6730.

On the contrary, an uptick beyond May 30 low of 0.6900 can trigger the pair’s pullback to 0.6940 and 0.6970 numbers to the north

Event Risk Data Today

- NZ: Service activity (PSI) fell to a seven-year low in April.

- US: May NAHB homebuilder sentiment is expected to continue to edge up to 67 from 66