|Short term = 1 week to 1 month
Long term = 1 month to 1 yearAUD/USD – Short term trend UP, Long term trend UP
Support levels: 0.7480, 0.7330, 0.7050, 0.6830.
Resistance levels: 0.7760, 0.7850, 0.8080.
Currently trading at 0.7520, we expect a range of 0.7480 – 0.7580 over the week.
The AUD/USD continues to trade within 0.7480-0.7580 as it remains capped by North Korea concerns and Trump’s protectionist policies.
- Commodity currencies were sold off overnight after President Trump slapped tariffs of up to 24% on imported softwood lumber from Canada and announced a sweeping investigation into whether the importation of foreign steel jeopardises US national security and would justify imposing tariffs against a broad range of countries.
- The Trump administration clashed with world financial leaders who gathered in Washington last Thursday over trade. The US want fair trade but said that if other countries insist on having a tariff on a product, which the US prefer they not, then President Trump believes these countries should be treated in a reciprocal manner and have their product taxed when coming into the US.
- President Trump’s trade protectionist policies towards foreign steel may hit the Chinese steel industry’s demand for Australia’s iron ore exports.
- Australian energy and basic materials companies are attracting North American buyers as the Australian economy diversifies.
- Inflation has returned to 2.1% and within the RBA’s target range between 2.0% – 3.0% for the first time since Q3 2014. NAB’s Business Confidence rose to 6 in Q1 from 5 in Q4 of 2016.
UNITED STATES OF AMERICA
- President Trump has commenced his trade protectionist policies with global trade likely to suffer as his administration said the US will not be taken advantage of any more.
- President Trump criticised Canadian PM Trudeau’s dairy polices and said that it’s a disgrace.
- President Trump launched his Buy American Hire American policy last week and is announcing his tax reform later today which could free up capital and see increased spending by individuals and businesses.
- President Trump does not want a strong USD and will actively try to weaken it as a weaker USD will increase demand for US exports.
- Economic data releases over the past week continue to show a mixed US economy with Existing Home Sales Change up by 4.4% in March from -3.9% in February, Markit Manufacturing PMI up 52.8 in April from 53.3 in March and Markit Services PMI up 52.5 from 52.8 for the same period.
- The Philadelphia Fed Manufacturing Survey weakened to 22.0 in April from 32.8 in March while New Home Sales rose 5.8% in March from 0.3% in February.
The AUD/USD is currently trading at 0.7520 and has again traded between 0.7480 – 0.7580 over the past week.
The AUD/USD has failed to rally in line with the stock markets as it now finds another reason for weakness from Trump’s protectionist polices.
We maintain our long term UP view for the AUD/USD as the AUD benefits from strong export demand with the current level of the AUD/USD adding to future trade surpluses. The Australian economy directly benefits from a recovering Chinese economy while the Trump Administration has called for a competitive (weaker) USD to drive growth in manufacturing, jobs and exports which should add to further support to the AUD.
We expect a range of 0.7480 – 0.7580 over the week. A break of 0.7480 opens for further downside towards 0.7330 while a break above 0.7580 could see another attempt at 0.7680 over the week.
AUD/CNY – Short term UP, Long term trend UP
Currently trading at 5.1800, the AUD/CNY has been relatively flat over the past week. We find support at 5.1500 and 5.1000 with resistance at 5.2500 and 5.3000. We expect a range of 5.1500 – 5.2200 over the week.
- Chinese policymakers are bullish on the Chinese economy following a solid start in Q1 as the CNY stabilizes and capital outflows slowdown.
- China is confident of reaching 6.5% growth this year with the PBOC saying that the improving economy has seen capital return to China.
- Chinese regulators are clamping down on shadow banking and speculative trading which has triggered selling on the Chinese stock markets.
AUD/EUR – Short term DOWN, Long term trend UP
Currently trading at 0.6890, the AUD/EUR has weakened over the past week as the AUD is sold on risk. We find support at 0.6780 and 0.6630 with resistance at 0.7050 and 0.7300. We expect a range of 0.6800– 0.6970 over the week.
- The EUR surged after Pro-European French Presidential candidate Emmanuel Macron topped the polls in the first round of the French Presidential elections.
- The ECB may start winding back monetary stimulus if Macron wins the French Presidency and defeats the populist threat of Le Pen given the recent recovery in the Eurozone economy.
- The weaker EUR has seen manufacturing recover to its highest level since 2014 as export demand increases for cheaper European goods and adds significant growth for the Eurozone economy. Eurozone Consumer Confidence improved in April and inflation is running at 1.5% year on year in March.
- The German current account surplus continues to be one of the biggest sources of imbalance in the global economy and within the Eurozone. The surplus is not driven by trade but rather by excess savings over investments due to bad policies and an ageing population.
AUD/GBP – Short term DOWN, Long term trend UP
Currently trading at 0.5870, the AUD/GBP has fallen as the AUD weakens on Trump’s protectionist policies. We find support at 0.5780 and 0.5600 with resistance at 0.6080 and 0.6300. We expect a range of 0.5800- 0.5930 over the week.
- PM May will meet with the EU Commission head Juncker and chief negotiator Barnier to discuss the upcoming negotiations on the UK’s withdrawal from the EU.
- The EU is making new demands over financial services, immigration and the bills Britain must settle before ending their 44-year EU membership.
- The UK is expected to more than make up for all the exports it will lose due to Brexit by negotiating trade deals with India, USA, China, Canada, Australia and New Zealand.
- The GBP rallied on the back of stronger public finances but retail sales disappointed in March, falling 1.8%.
- UK Consumers’ inflation expectations have weakened over the past few months as UK households expect the weaker GBP driven surge in inflation to end sooner than the Bank of England does.
AUD/JPY – Short term trend UP, Long term trend DOWN
Currently trading 83.90, the AUD/JPY has rallied as the JPY is sold on safe haven selling. Support is found at 81.50 and 79.80 with resistance at 85.30 and 97.50. We expect a range of 83.00 – 85.30 over the week.
- The Bank of Japan is expected to upgrade its forecasts for GDP but downgrade its inflation outlook when it releases its Outlook for Economic Activity and Prices on Thursday.
- The JPY has weakened as risk sentiment improves and safe haven demand diminishes following the first round of French presidential elections.
- Economic data releases for the past week showed Japanese Exports up 12.0% and Imports up 15.38% year on year in March.
AUD/NZD – Short term trend UP, Long term trend UP
Currently trading at 1.0870, we find support at 1.0580 and 1.0330 with resistance at 1.1050 and 1.1380. The AUD/NZD has recovered as Trump’s protectionist policies are likely to impact NZ’s economy more than Australia’s. We expect a range of 1.0780 – 1.1000 over the week.
- NZ’s CPI came in at 1.0% in Q1 with inflation running at 2.2% year on year in Q1 and beating expectations.
- The NZD fell against most major currencies as Trump’s growing protectionist policies are seen to have a negative effect on NZ’s trade particularly its dairy industry.
- We expect the AUD/NZD to continue higher as the RBA remains comfortable with the level of the AUD while the RBNZ calls for further depreciation of the NZD.
AUD/ CAD – Short term trend UP, Long term trend UP
Currently trading at 1.0230, we find support at 1.0120 and 99.80 with resistance at 1.0380 and 1.0500. The AUD/CAD has rallied as the CAD takes a direct hit from Trump’s protectionist policies. We expect a range of 1.0150 – 1.0380 for the week.
- The US – Canada trade wars have begun with the Trump administration announcing the US will slap retroactive tariffs of up to 24% on subsidized softwood lumber sold by Canada into the US.
- Canadian PM Trudeau has warned that Canada and the US could both suffer a thickening border as trade tensions between the two countries escalate. He said that you cannot thicken this border without hurting people on both sides of it.
- President Trump said that Canada has made business for the dairy farmers in Wisconsin and other border states very difficult and he would not stand for this.
- Bank of Canada Governor Poloz said that new housing measures should dampen demand.
- We expect the AUD/CAD to appreciate as the Canadian economy faces major hurdles due to Trump’s protectionist policies while the Australian economy benefits from a recovering Chinese economy.