25th July 2016 – Weekly Currency Market Report.



The Market in Brief:

              • AUD down against the majors with the exception of the Kiwi
              • Dovish RBA comments see the AUD fall.
              • GBP flat against the majors on mixed data
              • ECB leaves rates unchanged as expected 
              • USD data mixed

              CAD data prints above expectations

Market Events Due:

            • AUD CPI (Wed)
            • EUR German Ifo Business Climate (Tue) EBA Bank Stress Test Results (Sat)
            • USD CB Consumer Confidence and Core Durable Goods (Wed) FOMC statement and unemployment claims (Thur) Advanced GDP (Fri)
            • GBP Prelim GDP q/q (Thur)

            JPY Monetary Policy Statement (Fri) BOJ outlook report and press conference

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AUDUSD: The AUD closed at the low, down 3% from its high 2 weeks ago. The support level at which it opened last Monday was broken and over the week it was down 1.5%. Dovish comments by the RBA from the minutes of their July 5th meeting ,suggesting they may cut rates again added to the selloff. Inflation figures released this Wednesday on July 27th will determine whether they cut rates again on August 2nd. At this stage the market is pricing in a 70% chance of a rate cut to 1.5%.

AUDEUR: As forecast the AUD fell against the EUR. It closed 1% lower, after being 1.5 % lower earlier in the week and down from it’s 3 month high and 7% rally in 8 weeks. As stated in the reports over the last 2 weeks report the solid resistance at this level as the last 3 times it was here we saw significant corrections. On the flip side the EU is still in a dire situation given 1. they are in negative interest rates, 2. the recent Brexit, 3. Italy’s banks have a large amount of NPL’s (Non Performing Loans) and their share price is dropping rapidly 4. Can the ECB continue to buy EUR 80bn a month beyond 2017. 

AUDGBP: The AUD posted its second weekly loss against the GBP. Data out of the UK was mixed but the huge overselling of the GBP post Brexit and the RBA’s dovish comments were the 2 things responsible for the fall after posting the 32 month high 2 weeks ago. The AUD closed down 1% after being down 2.25% at one stage. 

AUDNZD: The Kiwi was the only major currency the AUD managed to close higher against. It closed only 25 points higher after being up 1.25% at one stage. As stated in last weeks report it had 6 up days in a row and whilst the solid resistance was temporarily broken it came back and closed very close to those levels.    

AUDJPY: The AUD closed down around 1% lower after being up 1% earlier in the week. The medium term resistance that has held since early May was not broken. If the BOJ cuts rates on Friday we should gat a rally to give importers an opportunity to cover at the previous levels of resistance.

AUDCHF: As forecast the big line in the sand that has held for the last 16 months remained intact and AUD fell around 1.25 % over the course of the week.

Compass Global Markets Team.



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