Compass Global Markets' Blog

11th July 2016 - Weekly Currency Market Report.

Posted by Thomas Su on July 12, 2016 at 3:34 PM

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The Market in Brief:

        • AUD up against USD,EUR, GBP, CAD and CHF
        • AUD down against JPY and NZD
        • RBA leaves rates on hold as expected
        • AUD data prints below expectations but AUD rallies against most majors
        • USD NFP print 287k v expected 175k
        • USD Unemployment one tick up from 4.8% to 4.9%
        • GBP continues its decline after Brexit 

Market Events Due:

        • GBP Inflation Report Hearings (Tue) Monetary Policy Summary and Official Bank Rate (Thur) BOE Gov Carney speaks (Fri)
        • CNY Trade Balance (Wed) GDP q/y Industrial Production y/y (Fri)
        • CAD Monetary Policy Report, Rate Statement, Overnight Rate and Press Conference (Thur) Mnfctring Sales (Fri)
        • AUD Unemployment Rate and Employment Change (Thur)
        • USD CPI, Core CPI, Retail Sales, Core Retail Sales (Fri) Prelim UoM Consumer Sentiment


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AUDUSD: The AUD has recovered well since its post Brexit drop of 4.5% in 5 hours, proving that once again AUD is up by the stairs and down by the elevator. It is still 1% shy of the pre Brexit high but there will be short term resistance here given we have rallied 2% in the last 2 days. 
US NFP printed 287k v expected 175K and the USD strengthened briefly then more than gave up those gains going into the close. For the time being it dashes fears of a recession in the US and has increased the chances of a Fed rate hike in December to 24%. 

AUDEUR: The AUD has had 7 consecutive weekly gains against the EUR, up 6.75% in that time to finish at a 2.5 month high. There is solid resistance at this level as the last 3 times it was here we saw significant corrections. EUR is down against the majority of the majors over the last couple of weeks given the Brexit and rumours of other countries looking at the possibility of following Britain's lead.

AUDGBP: The AUD closed at a fresh 32 month high against the GBP. AUD started its rally pre Brexit and in the last 6 weeks has rallied 16.5%. Adding to the downward pressure on the currency is the departure of Boris Johnson and the architect of the leave campaign Nigel Farage, who apparently resigned after receiving death threats. This continues to put the GBP under pressure even though they will be free to pursue trade deals with other countries.

AUDNZD: In my last report 4 weeks ago I said "Kiwi as strong as the All Blacks and the best performing currency of the week". It has maintained the trend against the majors with the exception of the JPY. AUD hit a fresh 15 month low against the NZD on Friday which is great for those receiving NZD.   

AUDJPY: The AUD finished the week up against the JPY which has been the strongest performing currency. There is short term resistance at this level. Given the fact that Japanese Prime Minister Shinzo Abe has disappointed the markets and refrained from further expected stimulus over the last couple of months, which has seen the JPY outperform all major currencies, we think it is only a matter of time before he does. JPY strength is certainly affecting exports and his attempts to stimulate the economy and the move into negative rates has so far failed to produce the desired outcome. 

AUDCHF: AUD posted its 3rd weekly high against the CHF, breaking through daily resistance to a much bigger line in the sand of weekly resistance that has held for the majority of the last 16 months. 

Compass Global Markets Team.

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