Daily Forex Commentary

04 October 2017 - Aussie tests new lows as USD threatens to break outside recent bear trend

By Vani Kolluri

New Zealand Dollar:

 

The New Zealand Dollar opens this morning at 0.7155, hitting a near month low as dairy prices underperformed overnight. The Global Dairy Trade auction portrayed an average price decrease of 2.4%, making it the weakest auction in more than six months. Exacerbating the falling Kiwi was further evidence of a cooling property market, which weighed on market sentiment as the argument for a rate hike was further undermined. Despite the lacklustre domestic economic numbers and a retreated Greenback, the Kiwi has traded within a tight range all week, mostly oscillating between 0.7150 and 0.7250. Traders now turns to Thursday’s US announcements for further direction.

We expect a range today of 0.7130 – 0.7250

 

Australian Dollar:

 

The Australian dollar tested new 3 month lows through trade on Tuesday breaking through support at 0.78 and touching intraday lows at 0.7784. The AUD came under increased selling pressure following the RBA’s decision to leave rates on hold at 1.5%. While the decision was largely priced in the accompanying commentary offered little to excite investors noting the rising AUD would likely cause a slowdown in wider economic growth and restrain inflationary pressures. The comments dampened expectations that recent upticks in Business conditions and an improving labour market may prompt the RBA to consider a rate hike sooner. The break low found support and failed to push through the 100 day moving average offering investors buying opportunities and saw the AUD stage a brief relief rally pushing back through 0.78 and 0.7833. As attentions turn to a raft of U.S macroeconomic data sets for direction through the back of the week we are watching move approaching 0.7730 as a key marker of wider sentiment.

We expect a range today of 0.7730 – 0.7860

 

Great British Pound:

 

The Great British Pound is lower today when valued against its US counterpart falling overnight to 1.3222 on the back of weaker monthly Construction PMI for September. Britain’s construction industry has contracted for the first time since the immediate aftermath of the Brexit vote which fell below the 50 line for the first time in more than a year to 48.1 in September from 51.1 in August. Looking ahead today and all attention turns to monthly Service PMI index for September. The GBP/USD pair is currently trading at 1.3235. We now expect support to hold on moves approaching 1.3210 while any upward push will likely meet resistance around 1.3300.

We expect a range today of 1.8340 – 1.8720

 

Majors:

 

The US Dollar upturn stalled through trade on Tuesday as investors took stock, measured recent gains and squared positions leading into a busy macroeconomic docket. The Dollar edged lower against the 19 nation Euro while marking minor gains against the Yen as investors extended their focus towards Friday’s Non-Farm payroll print. Touching intraday lows at 1.17 the Euro rallied into the daily close touching 1.1770 while the Dollar broke through 113 for the first time in almost three months. The recent upturn in the Dollar comes on the back of renewed optimism for inflation expectations and wider growth prospects amid the promise of material tax reform and investors seem to be cautiously unwinding recent pessimism that had suppressed dollar upside and extended bearish channels. The shift in sentiment opens the door to extended USD gains, especially against emerging market and commodity driven currencies as markets unwind the heavy losses suffered since January. The question is how far will the rally run? With such a heavy reliance on macroeconomic performance attentions now turn to preliminary non-farm payroll numbers this evening and Fridays wage growth and labour market data Friday for wider direction.   

 

Data releases:

AUD:

AIG Services Index

NZD:

ANZ Commodity Prices

JPY:

No Data

GBP:

BRC Shop Price Index and Services PMI

EUR:

Spanish, Italian, French, German and Eurozone Final Services PMI, Retail Sales, German 10 Year Bond Auction and ECB President Mario Draghi Speaks.

USD:

ADP Non-Farm Employment Change, Final Services PMI, ISM Non-manufacturing PMI, Crude Oil Inventories and Fed Chair Janet Yellen Speaks

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