- AUD/USD is currently trading at 0.7095, up from 0.7088 lows and just a touch below the 0.7098.
- AUD/USD is managing to hang in there, but risks are mounted to the downside.
The data has been unkind to the Aussie, but the price could be a lot worse if indeed US data had held up more than it has. The DXY was off a touch overnight and the US 10yr treasury ranged sideways between 2.61% and 2.63%. Futures markets continued to price a 20% chance of a cut by December from the Fed.
From data, the while US durable goods orders rose a stronger than expected 0.4% in January, with supportive detail, both core orders and shipments posting decent gains and upward revisions to the prior month, prompting modest upgrades to Q1 GDP expectations, however, following yesterday’s benign CPI, February’s PPI data undershot expectations. The headline rate easing to 1.9% y/y (from 2.0% last month) with the core measure at 2.3% y/y. “There is no evidence of a pick-up in inflation pressures and the Fed’s hope that the steepening in the Philips curve will translate into higher inflation looks increasingly isolated,” analysts at ANZ argued.
“It has been an eventful month for the Australian economy, with GDP and other key data surprising to the downside, and interest rate expectations shifting,” analysts at Westpac explained, but argued noted that the Australian dollar is unchanged from USD0.7093 when their February Market Outlook went to print, having held a fairly tight range of USD0.7009 to USD0.7183 since.
“A consequence of Australia’s weak economic growth and the skew of global risks is a need for further monetary policy easing by the RBA. We believe this is most likely to take the form of two 25bp cash rate cuts in 2019 – the first delivered in August, the second come November,” the analysts explained.
Looking ahead, Chinese data on the cards
“China activity data is the main focus in Sydney trade, with Jan-Feb readings on industrial production, retail sales and fixed asset investment due at 1pm Syd/10am local. We are most interested in IP. The last reading was 5.7%yr in Dec, a modest improvement from 5.4% in Nov which was the slowest pace of growth since the depths of the GFC. Note that this is still a decent rate of expansion, in contrast to the PMI surveys which have been touted as implying outright contraction. Only a combined Jan-Feb reading is published, to avoid some of the wild swings that we see on e.g. trade data around lunar new year. Consensus is 5.6%yr for Jan-Feb 2019 vs Jan-Feb 2018. Retail sales are seen up 8.2%yr, investment 6.1%,” analysts at Westpac explained.
AUD/USD levels
Valeria Bednarik, Chief Analyst at FXStreet noted that the 4 hours chart shows that the pair held above a bullish 20 SMA, which rejected bearish interest multiple times in the last few sessions and currently stands at 0.7060:
“Technical indicators in the mentioned chart hold within positive levels although lacking directional strength. The 100 SMA maintains a modest downward slope at around 0.7100, reinforcing the resistance level which break may trigger a recovery up to 0.7180, particularly if Chinese data surprises to the upside.”
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