1st July 2020 - AUD/USD kick-starts Q3 around 0.6900, eyes China Caixin Manufacturing PMI


Good Morning,


Market Headlines

US equity markets continued is rise from yesterday during quarter-end rebalancing even though increased Covid numbers in the US. The S&P500 bounced by 1.6%,

US 2yr treasury yields closed 0.15% with 10yr yield rising to 0.66% while locally the Australian 10yr yield rose to 0.93%. Brent oil futures fell 1.3% to $41.15, copper was up 1.4%, iron ore also rose 0.6% to $100.05, and gold was up 0.5%.


Currencies

US dollar index closed 0.2% lower for the day.

EUR traded between 1.1190 and 1.1260.

USD/JPY traded from 107.60 to 107.98 – highest level since 9 June.

AUD traded off 0.6833 to 0.6912.

NZD also rose from 0.6385 to 0.6461.

AUD/NZD traded between 1.0680 and 1.0720.


AUD Thoughts

- AUD/USD kick-starts Q3 around 0.6900, eyes China Caixin Manufacturing PMI

- Gains in equities, commodities supersede virus woes, fresh US-China tension.


AUD remains at 0.6905 this morning and seems to ignore the recent virus wave 2.0 and the fears associated with it whilst also appearing to so little attention to the latest Sino-American tussle over the passage of the Hong Kong security law. The reason could be traced to the quarter-end rebalancing of equities and commodities as well as hints of further stimulus from the US.


21-day Simple Moving Average (SMA) keeps questioning the bulls around 0.6910 while a downward sloping trend line from June 10, at 0.6925 now, adds to the upside barriers. Meanwhile, sellers are looking for entries below 0.6850. Amid all these plays, the market’s mood remains positive unless the quote slips below 200-day SMA, at 0.6668 now.


Event Risk Data Today

Australia: Core-logic Home Price Index data is released today with market expectations expected to fall by 0.7% continuing the trend from previous month. Dwelling Approvals for May is also released with market expectations of a decline of 7.8% capturing the full impact of the virus.


New Zealand: May Building Consents are expected to show early positive signs of activity following the progress NZ have made with the virus, expectations are to be 13%.


Japan: Q2 Tankan Large Manufactures Index data is released today with markets factoring another larger fall (-31) bringing the 6th consecutive quarter of negative growth.


Asia: Plenty of Manufacturing PMI data to be released today for Malaysia, Indonesia, South Korea, Taiwan and India.


China: Caixin Manufacturing PMI data released today with expectations to stabilise


Europe: Markit Manufacturing PMIs to be released with expectations of positive numbers for UK and Germany.


US: ADP Payrolls are expected to recover from -2760k to 2850k in June. Markit Manufacturing PMI expecting little change, ISM Manufacturing Index is expecting a slight improvement to 49.7. May construction spending is expected to come in positive at 1.0% following poor numbers for April


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