24th July 2019 - AUD/USD remains below 100-day EMA amid few fresh catalysts

Good Morning,

Market Headlines

- US Trade Representative Robert Lighthizer and senior U.S. officials plan to travel to China next Monday for the first high-level, face-to-face trade since talks broke down in May.

- US President Trump announced a bipartisan deal to suspend the debt ceiling and boost spending levels for two years, averting the risk of a payment default.

- EU trade negotiator Malmstrom stated that EU would impose retaliatory tariffs of EUR35bn on US goods if the Trump Administration were to impose tariffs on EU cars and auto parts, given the lack of progress in negotiations as US insist EU should include agricultural goods.

- Boris Johnson was selected by his Party as leader and will be UK’s Prime Minister tomorrow afternoon. The key issue in the near term will be the formation of his Cabinet and how vehemently he and the Cabinet push for a no-deal Brexit as they strive for a deal to leave EU by the (current) end of October deadline.

- Brent crude oil rose 1.2% to $63.55, helped by news of the US-China meeting. Iron ore fell 1.0% to $117.85 on expectations supply would rebound from the disruption in Brazil earlier this year.


- The US dollar index is up 0.5% on the day, outperforming all the majors.

- EUR fell from 1.1195 to 1.1148 – a two-month low.

- USD/JPY rose from 108.00 to 108.29.

- AUD fell from 0.7035 to 0.6996.

- NZD fell from 0.6740 to 0.6703.

- AUD/NZD rose from 1.0420 to 1.0453.

AUD Thoughts

- Aussie traders have to respect greenback strength amid lack of fresh catalysts at home.

- 0.7000/0.6995 challenges downside break of 100-day EMA.

With the global markets keep praising the greenback strength, the AUD/USD pair remains on a back foot under 100-day EMA while making the rounds to 0.7000 during early Wednesday trading.

Be it the extension of the US debt/spending limit or fewer calls favouring a heavy Fed rate cut in July, the US Dollar (USD) benefited from all and pleased the bulls on Tuesday. Buyers even ignored sluggish prints of the second-tier US data in search of better returns.

Global risk sentiment was also buoyed by trade positive headlines. The US 10-year treasury yields rose more than 3 basis points to 2.078% by the press time. Given the traders’ preference for the USD over the Australian Dollar (AUD), better than forecast prints of Weekly ANZ Roy Morgan Consumer Confidence data from Australia was largely ignored.

Moving on, markets await fresh clues on the US-China trade deal for near-term direction amid no data/event scheduled at home. It should also be noted that the US economic calendar offers few readings during the latter part of the day.

Technical Outlook

Despite declining below a 100-day exponential moving average (EMA), the Aussie couldn’t break 0.7000 – 0.6995 support-zone comprising 21-day EMA, July 17 low and July 08 high, which in turn signals brighter chances of the quote’s pullback to 0.7020 number comprising the broader EMA. Should price manage to remain strong above 0.7020, July 19 top close to 0.7080 should become buyers’ preference. Meanwhile, a downside break of 0.6995 can have 0.6980 and 0.6910 mark including July 10 bottom as following rest-points.

Event Risk Data Today

- NZ June trade balance is expected to be in surplus (+$100m), although both exports and imports are expected to have declined from May.

- Euro Area: Jun M3 money supply and lending data are released.

- US: Jun new home sales are expected to a show a stabilisation.

- Jul Markit flash PMI’s are released for Japan, the Euro Area and the US.

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