April 14, 2019 — 4 min read
Author: Stuart Talman
The Aussie dollar finished last week at its highest level since late February, sitting just below key resistance at 0.7200 - a level that has proven to be an impenetrable wall over the past few months.
Finishing the week just over 1% higher, price action whipsawed through the second half of the week, ultimately influenced by an improvement in risk appetite. Investors have found comfort in buying equities through 2019 and with US equity markets ending the week on a strong footing, the Aussie dollar was also in favour.
And whilst there has been much focus on the possibility of a US recession, ongoing trade tensions (US + EU tensions escalating this past week) and still uncertainty over both a US - China trade deal and Brexit progress, equity markets push higher and the Aussie dollar remains above 70 US cents.
Global markets have gained comfort from the fact that the Federal Reserve will refrain from raising rates further - a key development that lead to a halt to the deteriorating outlook that gripped markets at the start of the year.
Meanwhile locally, despite investors expectations for one or two rate cuts this year, the RBA remains steadfastly neutral.
In a speech on Wednesday, deputy RBA governor Debelle commented that the central bank awaits further confirmation that financial conditions warrant a shift to easing rates.
Whilst the last reading on GDP growth was poor, the Australian labour market remains robust - therefore providing conflicting signals regarding the health and outlook of the Australian economy.
It will likely prove to be a couple of key (shortened) weeks for the Australian dollar as employment data is released Thursday and Inflation data (CPI) released the following Wednesday.
Ongoing jobs growth strength and a strong CPI reading would further cast doubts on markets strong conviction that the RBA will cut. Debelle's speech last week was widely anticipated to be a platform for the RBA to align with the markets expectations - flagging upcoming rate cuts......this didn't occur. Aussie dollar bulls will smash through 72 US cent resistance should rate cut expectations be dialed back further.
Another factor that may support the AUDUSD this week has been the recent run of improving data out of China. Trade data out of China last week highlighted a sharp pick up in Chinese exports leading to a much larger than expected trade surplus. Investors interpreted this as positive reinforcement that the Chinese growth outlook is no longer deteriorating as a mix of both progress on US - China trade negotiations and stimulus from the Chinese authorities steadies what had been a bumpy ride.
It's a huge week ahead for economic data releases out of China with retail sales, industrial production and most importantly - GDP numbers all due on Wednesday.
In a short week with light trading volumes due to the Easter holidays - we may finally see Aussie dollar bulls push price action through important levels at 0.7200 and higher at 0.7220.
The information, materials, accompanying literature and documentation available on our internet site is for information purposes only and is not intended as a solicitation for funds or a recommendation to trade. XE, its officers, employees and representatives accept no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the above information.
While we take reasonable care to keep the information on the website accurate and up to date, there may be occasions when this is not possible. Case Studies and articles are not intended to predict future moves in exchange rates or constitute advice.
XE makes no representations, warranties, or assurances as to the accuracy or completeness of any information derived from third party sources. If you are in any doubt as to the suitability of any foreign exchange product that you are intending to purchase from XE, we recommend that you seek independent financial advice first.
For more information about XE, please click here: Regulatory Information