22nd July 2019 - Sellers catch a breath around 0.7050 amid mixed sentiment

Good Morning,

Market Headlines

- US consumer sentiment held firm near 15-year highs in early July, for yet another month, the Michigan survey coming in at 98.4, little changed from the previous month. Both current conditions and expectations held firm, record highs in US stocks and a solid jobs market keeping sentiment elevated.

- Fed dove Bullard said an easing now would be insurance against a slowdown, but favours a 25bp cut (rather than 50bp), and doesn't expect the Fed will be entering into an easing cycle.

NY Fed officials clarified that earlier remarks by its President Williams – that “it pays to act quickly” when stimulus is needed – were academic and not about possible action at the 31 July meeting.

- German June PPI was lower than expected (1.2%y/y, est. 1.5%y/y) – still no inflationary pressures.

- Brent crude oil rose 0.4% to $62.45. News of Iran’s seizure of two oil tankers broke after markets closed, with after-market trading pushing prices 1.4% higher. Gold initially made a six-year high at $1453 before closing 1.4% lower.


- EUR fell from 1.1270 to 1.1204.

- USD/JPY rose from 107.50 to 107.97.

- AUD fell from 0.7075 to 0.7038.

- NZD fell from 0.6790 to 0.6759.

- AUD/NZD fell from 1.0420 to 1.0401.

AUD Thoughts

- Recent trade positive headlines stop further declines of the Aussie.

- Political pessimism and the greenback strength question the buyers.

Having slipped from the 12-week high, AUD/USD stabilizes around 0.7050 this morning. The Aussie also had to bear the burden of the US Dollar (USD) strength on Friday as investors rolled back expectations of a 50 basis points (bps) Fed rate cut. Uncertainty surrounding the US-China trade deal and lack of positive data/events at home also added weakness into the pair off-late. Though, latest news from Chinese media signals that the dragon nation is ready to purchase more of the US agriculture products, which becomes a positive step towards the much-awaited trade deal.

On the negative side, political tension surrounding Iran has increased after the gulf nation seized two of the UK oil tankers, releasing one afterward. While trade positive news favours the quote’s recovery, overall USD strength and political pessimism continue to undermine the market sentiment. As a result, no major change in the global bond yields can be witnessed during the early-day.

Moving on, no major data/events are on the economic calendar to watch except the US Fed National Activity Index (June) that slipped to -0.05 previously. With this, investors can keep searching for qualitative catalysts for near term directions.

Technical Outlook

200-day exponential moving average (EMA) level of around 0.7100 continues to be a tough nut to crack for the buyers targeting April month top around 0.7210. Meanwhile, 100-day EMA level of 0.7020, 0.7000 round-figure and the current month bottom surrounding 0.6910 can keep being on sellers’ radar.

Event Risk Data Today

- Japan: BOJ Governor Kuroda speaks at the IMF in Washington.