Daily Forex Commentary

11 January 2017 - Investors nervous ahead of key Trump address

By Matt Richardson

New Zealand Dollar: 

The New Zealand Dollar begin the session strong yesterday climbing higher against the US Dollar to 0.7045 but once again faced selling pressures around 0.7040. Investors continued to worry about Brexit and the impact it may have which gave support to the Greenback against a basket of major currencies. NZD/USD fell to a low of 0.6958 and with continued expectations for higher interest rates this year in the US the Kiwi will struggle short-term to break 0.7040. Light this week with macroeconomic data so any moves will be assisted by offshore events.

We expect a range today of 0.6940 – 0.7040

 

Australian Dollar:

The Australian dollar bounced within a relatively tight trading band throughout Tuesday holding onto recent gains and consolidating moves above 0.73U.S cents. Wider USD weakness enable the AUD to touch intraday highs at 0.7384 as investors looked to sell down Greenback holding ahead of upcoming risk events. President Elect Donald Trump is due to conduct his first news conference prompting nervousness across financial markets. There is a wider concern the Republican will take a hard line approach to trade policy and relations with China while tapering down the high level of fiscal stimulus promised throughout the electoral campaign. The AUD has enjoyed strong gains through the first part of 2017 as investor’s square positions and the pace of the USD’s upward rally stalls. Having broken resistance at 0.7290 and 0.7350 analysts are looking to a consolidated move beyond 0.7395 before pushing back toward the psychological 0.75 handle.

We expect a range today of 0.7300 – 0.7400

 

Great British Pound:

The Great British found support through trade on Tuesday bouncing on moves approaching 1.21. Having suffered heavy selling following comments from Prime Minster Theresa May and German Chancellor Angela Merkel at the weekend Sterling moved back through 1.2150 to touch 1.2170. Wider USD weakness ahead of President Elect Donald Trump’s first press conference today prompted a Greenback sell off. Nervousness surrounding trump’s stance on China and Trade policies saw investors take profits and consolidate USD longs ahead of the political risk event. Attentions today turn to the President Elect while Bank of England Governor Mark carney Testifies to U.K Parliaments Treasury Committee. With inflation expected to overshoot the BoE’s 2% target Carney could well suggest a shift away from the current easing platform is on the table thus bolstering demand for the GBP, while an uptick in Manufacturing and Industrial activity will consolidate a recent recovery in the outlook for growth and heighten calls for a move away from the current easing cycle. Should Cable make another failed attempt at breaking through 1.21 we could see a considered rebound and move back toward the first point of technical resistance at 1.2270/1.2300.

We expect a range today of 1.7250 – 1.7550

 

Majors:

Commodity prices were the talk of the town in China during Tuesday’s trading session as we saw movements in coal and iron ore rally up to the capped daily limit of 8%. In further signs of renewed strength by the 2nd largest economy, Chinese producer prices saw a print of 5.5% up 1.6% from November and the highest reading in five years. Consumer Inflation was also steady at 2.1% with the Chinese government now targeting economic growth rates of 6.5-7% this year. Equities were supported by the rally in commodity prices, both the Nasdaq and FTSE hit new record highs, and the US Dollar coming off an intraday high of 116.30 against the Japanese Yen. Market participants continue to be cautious on their long USD positions as President elect Donald Trump speaks at his first press conference on Wednesday in New York before taking office on January 20th.

 

Data releases:

AUD:

No Data

NZDNo Data

JPY:

30 Year Bond Auction and Leading Indicators

GBPManufacturing Production m/m, Goods Trade Balance, Construction Output m/m, Industrial Production m/m and NIESR GDP Estimates

EUR:

German 10 Year Bond Auction

USD:

Crude Oil Inventories and 10 Year Bond Auction

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