Daily Forex Commentary

19 December 2016 - Aussie lower amid fears protectionist trade policies drag on China and its supply chain

By Michael Judge

New Zealand Dollar:    

The New Zealand dollar continued lower through trade on Friday suffering further downward pressures amid USD gains and Chinese uncertainty. Moving through 0.70 and touching intraday lows at 0.6937 the NZD appeared vulnerable to deeper low side corrections as fears Donald Trump’s protectionist trade policies will dampen Chinese production and manufacturing demand and subsequently move down the supply chain impacting demand for NZ commodities. With little of note on today attentions turn to Tuesday’s Global Dairy Trade prices and Wednesday’s 3rd quarter GDP numbers as markers for direction. Soft prints and a move back below 0.6970 could see the Kiwi extend losses into the end of the year.

We expect a range today of 0.6930 – 0.7030

Australian Dollar:

The Australian Dollar continued its downward correction through trade on Friday amid Federal Reserve Inspired volatility and USD gains. Having pushed topside resistance at 0.75 in the lead up to the Fed monetary policy decision the Aussie has suffered heavy selling across consecutive sessions and relinquished more than 200 points pushing through 0.73 to touch intraday lows at 0.7278 on Friday. Having broken supports at 0.7370/80 the AUD continued lower as fears surrounding Trump’s impact on China and the effect of protectionist trade policies added to bearish sentiment. With little on the docket through trade today attentions will turn the RBA’s monetary policy meeting minutes Tuesday for direction with investors watch supports at 0.7290 and 0.7230 as a markers of wider sentiment.   

We expect a range today of 0.7230 - 0.7350

Great British Pound

The Great British Pound staged a marginal recovery through trade on Friday levelling off and moving back through 1.2450. Having suffered heavy selling in the wake of the U.S Federal Reserve’s policy announcement on Wednesday Sterling was poised for deeper downward moves as Brexit fears remain front and centre, however profit taking and a squeeze on long USD positions enable the Pound to rebuff further downward pressures. With little of note through the start of this week direction will stem from offshore indicators and Brexit commentary.

We expect a range today of 1.7750 - 1.8050

Majors:

Having broken fresh 14 year highs in the wake of the Federal Reserve’s monetary policy announcement on Wednesday the U.S dollar moved marginally lower against a basket of major currency counterparts as profit taking took hold. Having signalled it would likely raise the benchmark interest rate three times throughout 2017 the Fed adopted a more aggressive path to tighter monetary policy than was expected and investors pushed the greenback and the Dollar index through fresh highs and intraday rallies. The speed of this rally however was prone to correction and dollar longs looked to shorten positions and take profit into a busy macroeconomic calendar and holiday period. The Euro edged back above 1.04, however the widening gap between central bank policy platforms opens the door for a move to parity and discussions surrounding expected Euro weakness into the first quarter of 2017. Political uncertainty, Brexit unknowns and dovish central bank policy platforms are weighing on the 19 nation combined unit and opened possibilities for further downside corrections.

Data releases:

AUD:

CB Leading Index

NZD:

Westpac Consumer Sentiment, Building Consents and ANZ Business Confidence.

JPY:

Trade Balance

GBP:

No Data

EUR:

German Ifo Business Climate, German Buba Monthly Report

USD:

Flash Services PMI

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