25th September 2020 - AUD Moves into a strong support area


Good Morning,

Market Headlines

Wall Street rallied in a rocky session on Thursday as beaten-down technology shares gained favour after data showing a surge in the sale of new homes revived faith in the economic recovery even as U.S. jobless claims rose unexpectedly. Commodities, Brent crude oil futures remained unchanged at $41.80, copper dropped 0.8%, and gold remained unchanged.

Currencies

AUD initially fell further to 0.7016 (two-month low) before bouncing to 0.7070.

NZD similarly found a base at 0.6512 (one-month low) before bouncing to 0.6560.

AUD/NZD fell from 1.0800 to 1.0754.

EUR initially fell further to 1.1627 (two-month low) but then bounced to 1.1686.

USD/JPY ranged between 105.20 and 105.53

AUD Thoughts

AUD/USD bears bailing out as price consolidates the down move.

US dollar giving back some ground, could give rise to healthy upside correction in AUD crosses

AUD/USD is currently trading at 0.7044 between a narrow start of the day range in Asia of 0.7042 and 0.7048 following an overnight session of corrective behaviour from a low of 0.7015 to 0.7072 the high. August's combination of rising equity prices and a sliding US dollar has been reversed in no uncertain terms, sending the AUD/USD back to late July levels.

However, despite the market chatter about Reserve Bank of Australia cuts next month, AUD/USD is performing the bid in improved risk appetite. There is now the scope, from a technical basis for recovery, especially if commodities can maintain the bid, for an upside correction. Oil, copper and the CRB index were marching ahead on dollar weakness. The CRB index was some 0.4% higher overnight.

Event Risk Data Today

New Zealand: Employment index fell sharply in June to 87.3 as the economy was emerging from Covid restrictions. Q3’s survey was conducted in early September when similar Covid restrictions were in effect.

China: The final Q2 current account balance will be released. The preliminary $119.6b surplus was boosted by reduced overseas travel and better-than-expected exports.

Singapore: Industrial production growth expected to remain at 1.7% in August following July’s 1.6% gain.

Europe: Stimulus will continue to sustain strong growth in M3 money supply in August (prior: 10.2%/yr, market f/c: 10.0%/yr).

US: Durable goods orders improved in July by 11.4%, driven by a lift in demand for vehicles although that is set to slow abruptly to 1.4% in August given the degree of economic slowdown.

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