|Short term = 1 week to 1 month
Long term = 1 month to 1 year
AUD/USD – Short term trend DOWN, Long term trend DOWN
Support levels: 0.6500, 0.6230, 0.6000.
Resistance levels: 0.6850, 0.7080, 0.7250, 0.7530.
Currently trading at 0.6740, we expect a range of 0.6670 – 0.6800 over the next week.
The AUD/USD remained between 0.6672-0.6772 over the past week as the market weighs up additional monetary easing by both the RBA and the Federal Reserve. Optimism over this week’s US and China trade talks leading to a trade deal have been overshadowed by fears of an escalating US-EU trade war.
- A report compiled by the Bank for International Settlements (BIS) and overseen by RBA Governor Lowe said that interest rates will stay lower for longer and force central banks into more unconventional policy to boost economies.
- The BIS report called on governments to do more to help strengthen their economies instead of relying on central banks deploying unorthodox measures.
- The new IMF Chief said that the global economy is experiencing a synchronised slowdown and warned that it would worsen if governments failed to resolve trade conflicts. She said that trade tensions had substantially weakened manufacturing and investment activity worldwide and that there is a serious risk that services and consumption could soon be affected. She added that the cumulative effect of trade conflicts could mean a USD700 billion (0.8%) reduction in global GDP output by 2020.
- PM Morrison said that Australia is the safe port in the storm amid global trade tensions due to its policy predictability and openness to international investment.
- Federal Treasurer Frydenberg said that he will consider the ACCC’s request for a new probe into the financial service sector as he called on banks to keep lending to stimulate the economy.
- A Harvard University analysis has labelled Australia as rich, dumb and getting dumber and said that Australia is less complex than expected for its income level. As a result, the Australian economy is projected to grow slowly and is forecast to be the 111th fastest growth economy over the decade.
- The Harvard analysis showed that iron ore, coal and gas account for 60% of Australia’s net exports with the higher iron ore price mainly responsible for the trade surplus.
- Australia has added 7 new export products since 2002 compared to New Zealand that added 17 which reflects Australia’s marked lack of income growth according to the analysis adding that with few nearby opportunities, growth can be pursued by making longer jumps into strategic areas with future diversification potential.
- Australian economic data released over the past week showed Consumer Confidence fell to its lowest level in 4 years, Retail Sales missed forecasts, Imports were flat and Exports fell with a Trade Surplus of AUD5.926 million recorded in August, New Home Sales rose but not as much as forecast, Construction fell, NAB’s Business Conditions rose while Business Confidence was flat.
United States of America
- President Trump cited human rights abuses when he blacklisted 8 Chinese tech companies and 20 other Chinese entities who specialise in Artificial Intelligence.
- Federal Reserve’s Evans said that downside risks to the US economy are stronger than upside risks.
- Fed Chair Powell said that the US economy is in a good place but policy is never on a preset course and the Fed will change as appropriate.
- The World Trade Organisation (WTO) authorised the US to retaliate against the EU for a 15-year dispute over aircraft subsidies. The US is allowed to impose USD7.5 billion in tariffs on imports from the EU starting 18 October.
- US trade groups said that new 25% tariffs on food from the EU will lead to higher prices ahead of the holiday season and cost American jobs.
- Singapore has overtaken the US as the world’s most competitive economy as business uncertainty and a decline in trade openness dragged down the US to second place.
- US economic data released over the past week showed Manufacturing and Factory Orders both fell, Services met expectations, Unemployment came in at 3.5%, its lowest level since 1969 with 136,000 jobs added while Business Conditions and Producer Prices both fell.
The AUD/USD is currently trading at 0.6740 and we expect a range of 0.6670 – 0.6800 over the next week.
- The AUD/USD may rebound if the US and China can strike a trade deal at their talks this week.
- The Australian-US interest rate differential is favouring the USD, but additional US interest rate cuts could happen sooner than forecast as the US economy suffers from trade wars with China and now with the EU.
- The Australian economy is showing various speeds as some sectors such as retail are deep in recession while sectors such as energy, agriculture and mining are booming.
- Increasing Federal and State government infrastructure spend is helping to fight off a recession as tax cuts and lower interest rates fail to show positive results.
- The AUD/USD is flirting with major support around 0.6670- 0.6700 and we expect this level to hold for now as a strengthening USD is not welcome by the Trump administration. A break of the 0.6670-0.6700 support zone however, could see further downside towards 0.6500.
AUD/CNY – Short term UP, Long term trend DOWN
Currently trading at 4.8080, the AUD/CNY has remained steady over the past week as the markets wait on the outcome of this weeks US-China trade talks. We find support at 4.7500 and 4.7000 with resistance at 4.8800 and 5.0000. We expect a range of 4.7800– 4.8600 over the next week.
- China and US trade talks resume this week with reports that Beijing is still willing to discuss a partial trade deal with Washington and increase annual purchases of US agricultural products to get a deal done.
- China’s Commerce Ministry urged the US to remove the recent sanctions on Chinese firms and said that China will take any necessary measures to firmly protect its own interests.
- China’s central bank, The People’s Bank of China (PBOC), has raised its holdings of gold and has added more than 100 tonnes of gold to its reserves since it resumed buying last December as a hedge for its large US holdings.
- Chinese economic data released over the past week showed Services fell slightly in September.
AUD/HKD – Short term UP, Long term trend DOWN
Currently trading at 5.2900, the AUD/HKD has rallied slightly over the past week. We find support at 5.2200 and 5.1550 with resistance at 5.3300 and 5.4050. We expect a range of 5.2700 – 5.3300 over the week.
- Hong Kong leader Lam did not rule out asking Beijing for help as HK suffers from months of anti-government protests that are severely damaging the economy.
AUD/EUR – Short term UP, Long term trend DOWN
Currently trading at 0.6140, the AUD/EUR has been stable over the past week. We find support at 0.6000 and 0.5880 with resistance at 0.6330 and 0.6480. We expect a range of 0.6100 – 0.6230 over the week as the EU-US trade war impacts a Eurozone economy which is already close to recession.
- The US with WTO authorisation has entered into a trade war with the EU.
- The Eurozone economy could be headed for recession following a big slump in German factory orders.
- German Chancellor Merkel told UK PM Johnson that a Brexit deal would not happen and was overwhelmingly unlikely unless Northern Ireland remained in the customs union.
- The European Central Bank (ECB) Vice President has expressed concerns about the side effects of any further reduction in interest rates.
- Eurozone economic data released over the past week showed key data missing forecasts such as Services and Producer Prices while Retails Sales rose.
AUD/GBP – Short term UP, Long term trend DOWN
Currently trading at 0.5520, the AUD/GBP has rallied as Brexit concerns hit the GBP. We find support at 0.5280 and 0.5030 with resistance at 0.5680 and 0.5880. We expect a range of 0.5480 – 0.5630 over the next week with the GBP under pressure from a possible no-deal Brexit.
- European Council President Tusk warned PM Johnson that Brexit is not about winning some stupid blame game and that the future of Europe and the UK as well as the security and interests of its peoples are at stake.
- PM Johnson and his Irish counterpart held discussions and reiterated their mutual desire to agree a Brexit deal before the 31 October deadline.
- The EU offer on the Irish backstop has been rejected by both Irish nationalists and unionists.
- The EU’s chief Brexit negotiator said that he believed a Brexit deal was very difficult but possible despite German Chancellor Merkel making it clear to PM Johnson that a deal based on his proposals is now overwhelmingly unlikely.
- The Bank of England (BOE) said that the UK financial system is prepared for a no-deal Brexit.
- UK economic data released over the past week showed House Prices and Retail Sales both fell.
AUD/JPY – Short term trend UP, Long term trend UP
Currently trading 72.40 the AUD/JPY has remained in a narrow range over the past week. Support is found at 71.80 and 69.50 with resistance at 75.80 and 78.50. We expect a range of 72.00 – 73.60.
- Japan has downgraded its assessment of the economy and said that it is worsening amid concerns the sales tax hike will impact spending.
- The Bank of Japan (BOJ) deputy governor said that he expects global tensions to persist for quite some time and that the BOJ will act as appropriate to boost the economy as needed.
- Japanese economic data released over the past week showed Labour Cash Earnings, Overall Household Spending and Machine Tool Orders all fell.
AUD/NZD – Short term trend UP, Long term trend UP
Currently trading at 1.0670, the AUD/NZD has slipped over the past week. We find support at 1.0630 and 1.0450 with resistance at 1.0880 and 1.1050. We expect a range of 1.0630 – 1.0800 over the week.
- The New Zealand government delivered the biggest budget surplus in a decade and more than double of forecasts.
- International research company, Capital Economics said that NZ economic growth will fall to 1.5% by next year, unemployment will rise and the RBNZ will be forced to cut interest rates if the government failed to provide stimulus to the NZ economy.
- NZ Economic data over the past week showed the GDP Price Index rose while the ANZ Commodity Price was flat.
AUD/ CAD – Short term trend UP, Long term trend DOWN
Currently trading at 0.8970, the AUD/CAD has recovered over the past week as the CAD comes under pressure from a vulnerable Canadian economy.
We find support at 0.8880 and 0.8650 with resistance at 0.9250 and 0.9500. We expect a range of 0.8930 – 0.9080 over the next week.
- Canada’s growing deficits and the slowing global economy are placing Canada’s economy in a troubling position according to the opposition leader Scheer as Canada prepares to go to the polls on 21 October.
- The Bank of Canada (BOC) may leave interest rates on hold if Friday’s employment data continues to show a robust domestic jobs market.
- Canadian economic data released over the past week showed Imports and Export rose and Building Permits beat forecasts.
AUD/ INR – Short term trend UP, Long term trend DOWN
Currently trading at 47.95, the AUD/INR has recovered over the past week. We find support at 47.30 and 45.50 with resistance at 49.50 and 53.00. We expect a range of 47.70 – 48.40 over the week as the INR is expected to remain under pressure from a slowing Indian economy.
- A new study has claimed that demonetisation hit Indian economic activity by 2%-3%
- The Reserve Bank of India (RBI) cut interest rates for the fifth consecutive time this year and slashed its growth forecast by nearly 1% saying that the Indian economy’s near-term outlook is fraught with risks.