18th April 2019 - AUD reaches 2 months high on Chinese data as markets look to employment data today

Good Morning,

Overnight Market Activity

· US equities opened at multi-month highs, but then retreated, the S&P500 currently down 0.3%. US bond yields also u-turned, unchanged on the day, as is the USD.

· The chances of a Fed rate cut by December, implied by Fed fund futures, remained at 50%.

· Dow Jones fell 3.12 points (0.01%) to 26,449.54, the S&P 500 lost 6.61 points (0.23%) to 2,900.45 and the Nasdaq dropped 4.15 points (0.05%) to 7,996.08.

· Gold fell, holding near 2019 lows touched in the previous session, as economic growth data from China assuaged concerns about global growth and drove investors into riskier assets. Spot gold slipped 0.2% to $1,274.15 per ounce

· Copper prices hit a nine-month high as firmer-than-expected economic growth figures from China boosted expectations for higher demand. Benchmark copper touched its highest since July 3 at $6,608.50 per tonne before finishing up 0.9 percent at $6,556. LME aluminium inched down 0.3% to $1,850 per tonne.

· Crude prices declined slightly as U.S. government data showed inventories drew down less than an industry report had suggested on Tuesday. Brent crude futures settled down 10 cents at $71.62 a barrel. U.S. West Texas Intermediate (WTI) crude futures settled down 29 cents per barrel at $63.76 a barrel.


· The US dollar index is unchanged on the day, ending at 97.01

· EUR round-tripped from 1.1300 to 1.1325 and back

· USD/JPY rose from 111.95 to 112.10

· AUD, which yesterday rose towards 0.7200 following strong Chinese data, pulled back overnight to 0.7162

· NZD preserved some of yesterday’s CPI-led losses, ranging overnight between 0.6705 and 0.6745

· AUDNZD was stable overnight around 1.0680, following yesterday’s NZ CPI-led jump to 1.0732 – the highest since November.

· AUDEUR rose towards 0.6370 highs however fell back towards 0.6330

AUD Thoughts

AUD reached a two-month high after data from China defied expectations for a slowdown. AUD broke just above 0.7200 cents, a level not seen since Feb. 22 after official figures showed China's economy grew at 6.4% in the March quarter when analysts had predicted a slowdown to 6.3%. Separately, China's industrial output grew at the fastest pace since July 2014 as factories ramped up output in anticipation of more business amid government support measures which boosted expectations China is at least starting to stabilise, which bodes well for global trade amid fears of a slowdown this year.

Today we have Australia's March employment report and as usual a wildcard event on the outcome. The market is positioned for better numbers on the jobs front so any positive reaction will drive AUD gains somewhat. Tonight we have Euro zone April PMIs and U.S. retail sales which could provide an alternative spark to drive AUD higher. Should the trio of data point to improved global growth central bankers from the Fed to ECB to RBA will be less inclined to initiate additional easing policies.

Technical Outlook

AUD heavy in NY as early upbeat risk sentiment shifts downward. Stocks, commodities & bond yields cannot sustain early gains. EM currencies hold gains though while USD/CNH holds near the day's low.

AUD slides toward 10-DMA & Apr 16 low. Key Australian, euro zone & US data loom, could rally AUD. Support near 0.7155/60 is in focus. Bulls need 0.7110/20 support zone to hold, if breaks 0.7045/55 is in play. Monthly techs are bullish, RSI biased up, possible head and shoulders bottom forming. 0.7205/10 break opens the door to January's high.

Event Risk Today

· Australian Economic data today : March employment is expected to rise by 15k (market @ 8k) with the participation rate holding at 65.6%. The unemployment rate expected to edge up to 5.1% from 4.9%.

· US: Mar retail sales are anticipated to rise 0.8%, following a 0.2% decline in Feb with sales volatile over the turn of the year and shutdown. Fedspeak involves Bostic at a roundtable in Florida.

Enjoy the Easter Break

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