4th June 2020 - AUD hasn’t been this overbought since January


Good Morning,


Market Headlines

Equity markets took a breath, the S&P500 down 0.7% on the day. Risky currencies and bond yields, though, made fresh recent highs. ECB increased its asset purchase programme. US weekly jobless claims at 1.877m was close to expectations, although continuing claims at 21.487m were above the 20.0m expected. April trade balance was close to expectations at -USD49.4bn. The widening of the deficit was due to a decline in exports of 20.5%m/m whilst imports declined 13.6%m/m.


Currencies

The US dollar index is down 0.5% on the day, to a fresh three-month low.

EUR rose from 1.1200 to 1.1362 – a three-month high, responding positively to the ECB’s extra QE.

The safe-haven yen underperformed, USD/JPY up from 108.60 to 109.16 – a two-month high.

AUD rose from 0.6900 to 0.6988 - last seen in early January.

NZD rose from 0.6410 to 0.6478 – a four-month high.

AUD/NZD slipped further to 1.0734.


AUD Thoughts

• The AUD/USD pair has been in a strong upward momentum and is approaching 0.7000.

• The pair has risen because of a weaker US dollar, China recovery, and a less dovish RBA.

• According to the RSI, the pair has not been this overbought since January this year.


On the daily chart, the AUD/USD pair is in its sixth straight day of gains. It is above the 100-day and 50-day exponential moving averages while the RSI has soared to the overbought level of almost 80. This is the most overbought it has been since January 2018. At the same time, the price is slightly below the important resistance level of 0.7000. Therefore, while the AUD/USD pair may continue to rise, there are more risks of buying it now than the potential rewards


Event Risk Data Today

Australia: The AIG Performance of Services index fell to a record low of 27.1 in April. In the May update, the focus will be on signs of recovery as the economy reopens.


US: Market expectations that non-farm payrolls fell by 7500k in May, lifting the unemployment rate to around 20.0%. The participation rate will play an important role in determining where the unemployment rate ultimately lands. Consumer credit data is also release with market expectations of a record fall of $20bn in April



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