9th May 2016 – Weekly Currency Market Report.

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The Market in Brief:

    • AUD down sharply against the majors and the worst perfroming currency for 2 consecutive weeks.
    • RBA cuts rates unexpectedly which sees AUD tumble and leaves door wide open for further cuts which adds to further falls
    • USD NFP print 160k V expected 203k 

Market Events Due:

    • NZD RBNZ Financial Stability Report anf Gov Wheeler speaks (Wednesday)
    • GBP Official Bank Rate, Monetary Policy Summary and Gov Carney speaks (Thursday)
    • USD Retail Sales Core Retails Sales. PPI and Core PPI (Friday)
    • CNY Industrial Production (Saturday)


REFERRALS: Client referrals are a very important part of our business. If you know of any contacts that could benefit from our comprehensive range of international currency transfer services, please do let me know. 


AUDUSD: The RBA cut the cash rate on Tuesday from 2.0% to a new historic low of 1.75%. While it was a 50/50 call the market reaction suggested the chance of a rate cut was much lower. The AUD immediately fell 2%. On Thursday the Retail Sales and Trade Balance printed above expectations but the AUD failed to rally. Later in the day the RBA released a dovish statement and left the door wide open for further cuts and the AUD fell sharply again. On Friday USD NFP created 160k jobs V expected 200k jobs but the USD held firm. The RBA has changed their bias from neutral to easing which will keep the AUD under pressure. AUD is now at a 2 month low and down 6% in just 12 trading days. Exporters with time on their side can wait to see if short term support here holds. For Importers there will be solid resistance 2% above which is a key long term pivot point. 

AUDEUR: The support which sat 45 points lower was broken and as forecast there was a steep correction lower. AUDEUR is now at a 3 month low, dropping 6.5% in 12 trading days. A good opportunity for exporters at the moment and exporters with time on their side can target another 1% lower while importers can target resistance 1.5% higher. .

AUDGBP: As forecast AUDGBP fell another 100 points to hit a 3 month low, dropping 8% in just 12 trading days. There is short term support at this level. If it breaks exporters will get an opportunity 1.5% lower. The “No Brexit” camp has continued to gain momentum and whilst all the talk is of the negatives associated with a Brexit there is no focus on the positives if they do leave. Importers can target a 1% rally.

AUDNZD: The short term support broke and exporters got their opportunity 150 points lower. AUDNZD is down 4% in just 8 trading days. The medium term upward channel has broken to the downside and with the possibility of further rate cuts from the RBA there is a healthy carry trade for the NZD. There is a chance exporters may get another 150 points on the downside but it will take another selloff in the AUD. Resistance sits 80 points higher for importers looking to take advantage of a rally. Gov Wheeler speaks Wednesdayand if he hints at further cuts NZD will weaken.

AUDJPY: Dropped another 3.5% over the week after being down 4.5% at one stage. The last 2 times it has been down here this year we have seen a solid bounce. It has dropped 9.5% in 2 weeks which suggests the sell off has been overdone in the short term. The concern here is if support here breaks their could be another steep fall. 

AUDCHF: The short term support for the AUD broke and it went 150 points lower to the next support level. The AUD is down 6% in 2 weeks against the CHF. A break of this support could see another run 100 points lower. Importers will find resistance 100 points higher.

ALTERNATIVE CURRENCY HEDGING: Ask us about a great alternative to traditional forward contracts that give the ability to cover at attractive levels, but with the flexibility to walk away should the spot rate improve or the contract not be required.

Compass Global Markets Team.

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