24th June 2019 - AUD upside limited but short-term gains possible

Good Morning,

Market Headlines

- USD ending last week on the back foot despite US yields rallying with Euro/usd to highs of 1.1378 and GBP/USD recovering towards 1.2750 from earlier lows of 1.2643. AUDUSD somewhat sidelined trading a 0.6904 to 0.6934 range.

- The USD was better bid in early European trade as the Greenback started to claw back some of the losses that stemmed from the FOMC meeting. Equities were mixed in early trade.

- The morning saw the release of the flash PMI numbers for June. France kicked things off strongly with manufacturing at 52 (50.8 expected) and services at 53.1 (51.6 forecast). The results from Germany also beat the analysts’ expectations with manufacturing at 45.4 (44.6 forecast) and services at 55.6 (55.2 forecast). Finally the EZ measure for manufacturing printed at 47.8 (48.0 expected) with services at 52.1 (52.0 expected).

- Euro made a high of 1.1319 following the German data but settled a bit below here after the EZ data failed to match the outperformance of the French or German numbers. The single currency was making gains on cross rates as the USD continued to edge higher. Oil was higher again as tension mount in Iran with Brent almost 10% higher over the last 9 days.

- The Fed’s ever dovish member Bullard said that it is unlikely that the forces weighing on inflation are solely transitory. The Fed’s Clarida was also on the wires saying that the US is near the 2% inflation target. He did say that uncertainty has increased of late and that he would do what is appropriate the sustain the expansion.

Currency Ranges 5pm Sydney

AUD/USD: 0.6904 – 0.6934

EUR/USD: 1.1285 – 1.1378

GBP/USD: 1.2643 – 1.2746

USD/JPY: 107.26 – 107.73

USD/CAD: 1.3178 – 1.3229

NZD/USD: 0.6555 – 0.6591

AUD/JPY: 74.16 – 74.52

AUD/NZD: 1.0522 – 1.0535

AUD Thoughts

The AUD/USD pair has settled last week at 0.6925, around the 50% retracement of its June slide. Like most other currencies, the Aussie rallied against the greenback amid this last being sold off following a dovish Federal Reserve hinting rate cuts coming. The pair rose amid dollar's weakness, although Aussie gains were limited by the poor performance of equities, as Wall Street closed with modest losses on Friday. There were no macroeconomic news coming from Australia that could interfere with sentiment trading.

Today, RBA's Governor Lowe is due to participate in a panel discussion at the Australian National University Leadership Forum, and comments on monetary policy will be closely watched.

Technical Outlook

From a technical point of view, the potential upward is limited, the AUD/USD pair settled just below a flat 20 DMA, while the 100 and 200 DMA maintain their bearish slopes above the shorter one.

Technical indicators in the chart failed to cross their midlines into positive territory, with the RSI lacking directional strength and the Momentum retreating. The pair is being capped by converging 100 and 200 SMA in the 0.6930 price zone, but developing above a firmly bullish 20 SMA, as technical indicators hold within positive ground, although without clear directional strength.

Support levels: 0.6890 0.6850 0.6820

Resistance levels: 0.6930 0.6970 0.7010

Event Risk Data Today

AUS – RBA Governor Lowe speaks in Canberra

GER – June IFO survey

USA – May Chicago Fed activity index

USA – June Dallas manufacturing activity

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