AUD – Australian Dollar
The Australian dollar remained firmly entrenched within recent ranges throughout Friday struggling to foster a meaningful break as market and investor convictions faltered in the face of trade uncertainty. With little headline macroeconomic data on hand to drive direction and monetary policy forward guidance largely priced in attentions remained squarely affixed to US-China headlines as a driver of two-way risk.
The trade tiff will continue to hold centre stage as we move into a new week with trade war headlines dominating broader direction. While key negotiators have hinted a phase one deal is very close to being signed, last week Senate bill supporting the Hong Kong protesters raises concerns underlying ideological differences will prevent an agreement being reached. We expect trade related risk to drive range bound direction forcing the AUD to bounce between support 0.6760 and resistance at 0.6830 in the lead up to key commentary from RBA Governor Lowe and Deputy Governor Debelle. In a highly anticipated address Governor Lowe is set to discuss unconventional monetary policy. With interest rates already at record lows and another rate cut forecast for February markets will be keenly attuned for any signal the RBA is moving toward unconventional measures of stimulus. A dovish undertone will likely see the AUD test supports and could prompt a break back toward 0.67 and 0.6680.
Price action for USD this week will be hampered by Thursday Thanksgiving holiday and long weekend. While the back and forth between trade delegates drives direction we could see some increased volatility in thin trading lines come the end of the week, especially if key inflation date due Wednesday misses the mark. Watch for fluctuation in USD/JPY on the back of risk trends.
Sterling remains beholden to election and subsequent Brexit outcomes, finding support through the end of last week as Johnson’s conservative look further cement their lead in the polls. Opening this morning just below 1.29 we anticipate the GBP will fluctuate between 1.27 and 1.31 in the lead up to the December 12th election.
The Euro could test the lower end of recent ranges this week having missed on key manufacturing PMI data last week. With little offered from new ECB head Christine Lagarde in her maiden address we can only expect the ECB will maintain it current path of QE and accommodative monetary policy as concerns lacklustre growth and stagnant inflation will require persistent and ongoing stimulus. A break below the psychological 1.10 mark could signal a downturn and move toward 1.0950.
AUD/USD: 0.6760 – 0.6830 ▼
AUD/EUR: 0.6130 – 0.6190 ▲
GBP/AUD: 1.8850 – 1.9150 ▼
AUD/NZD: 1.0550 – 1.0650 ▼
AUD/CAD: 0.8960 – 0.9065 ▼