Kiwi recovers slightly overnight – all eyes still on the greenback

Key Movers

The Australian Dollar saw limited movements to start the week, holding steady at support levels of 71 US Cents. Opening the morning treading water on renewed trade concerns between the United States and China, the AUD/USD was muted as traders ignored the release of China’s CPI print for the month of August which came in unexpectantly higher at an annualised rate of 2.3%.




The Aussie extended to intraday highs during the European session of 0.7130 with gains eventually paired back to test the 0.71 handle during North American trade as the greenback continued to trade higher off the positive Non-Farm Payroll release on Friday evening.



With the deteriorating Australian dollar continuing to face pressure from news both domestically and abroad, a further test of support at 71 US cents could possibly occur with the release of NAB business confidence levels this morning which has eased in the previous months this year.

The Australian Dollar opens this morning at 0.7110.


The Great British rose against the dollar on Monday after the European Union’s top negotiator Michel Barnier said an agreement for Britain to leave the economic bloc might be reached in the coming weeks. Following the news the GBP/USD pair jumped pass 1.3000 level mid-European morning, reaching a 5-week high of 1.3051.




On the local data front yesterday Gross Domestic Product (GDP) accelerated in the month of July, courtesy of a sharp rise in motor trading, lifting output to its quickest pace in nearly a year. GDP expanded by 0.3% in the month of July, above the MNI median forecast of a 0.2% rise, after a 0.1% rise in June. That took growth in the three months to July to 0.6%. Industrial Production also rose by less-than-expected In July, up by just 0.1% MoM, while manufacturing output contracted 0.2%. Looking ahead today we will see the release of UK Jobless Rate which is expected to remain at 4.00%.



From a technical perspective, the USD/GBP pair is currently trading at 1.3024. We continue to expect support to hold on moves approaching 1.2985 while now any upward push will likely meet resistance around 1.3050.


The US Dollar retreated marginally in overnight trading, losing some ground against most of the currencies as investors digested the news over the weekend. The US Dollar Index (DXY) shed 0.27% on the day to open at 95.15 against a basket of currencies.



With little on the economic calendar to drive markets, the Greenback took stock of current market conditions and traded within a tight range for much of the session. Between a surprisingly strong jobs report and a further escalation in the US-China trade war, the Dollar took the initiative early in the week and extended its gains from Friday only to slowly lose some of that ground throughout the American session. Nevertheless, the USD remains firmly on the front foot, moving into Tuesday.



The catalyst for the DXY retreat came from Europe with the Sterling and Euro both appreciating marginally against the Greenback after EU Chief Negotiator Barnier noted a potential timeline for a Brexit Deal. The Fibre and Pound both shot higher, boosted on the hopes that a Brexit deal could be agreed as early as six to eight weeks from now. Commodity currencies however didn’t fare so well with the CAD, NZD and AUD among the worst performers of the day and with no respite in sight.

Moving into Tuesday, investors again turn to the headlines with only a quiet economic calendar to contend with.


The Euro edged higher through trade on Monday creeping back through 1.16 to touch intraday highs at 1.1612. With little domestic data on hand to drive direction attentions were focused squarely on resuming US and European trade talks. The market found confidence in reports negotiations were moving forward, with the Trump and the US Trade Representative office seeking to commence Congressional consultations in a bid to fast track preliminary deals ahead of a November follow up.



While there were broader concerns Trump would renege on promises to waylay tariffs on EU automakers a promise from EU negotiators to import more LNG and soybeans seems to have placated the President for the time being and a move to securing longer term outcomes appears plausible moving into he end of the Year.


With little headline data on hand to drive direction through trade on Tuesday our attentions remain with ongoing trade developments ahead of the ECB policy announcement Thursday. With broader USD upside still intact we expect investors will continue to sell into rallies above 1.16/1.1650 while short term support holds firm on moves approaching 1.1350.


The Canadian dollar edged marginally higher through trade on Monday bouncing off 7-week lows to maintain a narrow band in the absence of headline data events. With little developments in ongoing NAFTA negotiations the Loonie struggled to break outside broader holding patterns, bouncing between 0.7560 and 0.7603. As ongoing discussion appear to have stalled the Loonie has found support in an ongoing Hawkish undertone proffered by the Bank of Canada and an open possibility the monetary policy committee may amend rates again before the end of the year.


Interest Rate upside is the primary prop supporting the CAD at present as broader trade concerns and softening oil prices weigh on the commodity driven unit. NAFTA continues to cast a specter of uncertainty over the short and medium-term outlook with key sticking points yet to be resolved and with talks on hold until after US trade officials return from the EU today we can expect little movement outside current ranges.


Attentions remain with trade with a break below support at 0.7560 opening the door to a deeper downward correction.