The November rally in equities stalled, having digested the previous day’s positive vaccine news which took the S&P500 to a fresh record closing high. Poor US Retail Sales added pressure on the greenback, whilst a Brexit deal could be announced as soon as next week as trade talks have resumed in Brussels. Commodities, Brent crude oil futures fell 0.7% to $43.50, copper fell 0.5%, iron ore rose 1.8% to $125.35, and gold fell 0.2%.
AUD/USD: 0.7289 – 0.7339 (two-month high)
EUR/USD: 1.1843 – 1.1893
GBP/USD: 1.3195 – 1.3272
USD/JPY: 104.08 – 104.57
USD/CAD: 1.3065 – 1.3116
NZD/USD: 0.6876 – 0.6910
AUD/JPY: 75.86 – 76.52
AUD/NZD: 1.0596 – 1.0623
The risk-sensitive AUD has lost traction on Tuesday. Monday’s enthusiasm about the successful tests of Moderna’s COVID-19 vaccine has been offset by fears about the introduction of tighter restrictions as the numbers of infections and deaths continue escalating in the US and Europe.
From a technical point of view, the Aussie remains trading within a near-term upside trend while above trendline support from November 2 lows, now around 0.7260. A further reversal below here, might lead to a test of November low 0.7220 and then the 50 and 100-day SMAS’s at 07175 and 0.7150.
On the upside, the pair should break above 0.7340 (September 16, November 9 highs) to retest long-term highs at 0.7415. Once above there, the next area of relevance would be the July 2018 top at 0.7480.
Event Risk Data Today
Australia: RBA Governor Lowe will participate on the panel at The Australian’s 2020 Strategic Forum (9:00am). Q3 Wage Cost Index to expected edge up 0.1%, the recent rise in underutilisation is set to put further downward pressure on wages in coming months.
Euro Area: Market anticipates a 0.2% increase in the final print of the October CPI. Annual price growth remains in deflationary territory at -0.3%yr, with services inflation particularly sluggish.
US: September total net TIC flows should continue to reflect the robust demand for US Treasuries. October data for housing starts will be boosted by low rates and families seeking more space (Mkt f/c: 2.5%), while elevated building permits point to a strong pipeline (Mkt f/c: 2.0%). The FOMC’s Williams (04:15 AEDT) and Bullard (05:20 AEDT) will speak.