Compass Global Markets' Blog

18th July 2016 - Weekly Currency Market Report.

Posted by Thomas Su on July 18, 2016 at 11:30 AM

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The Market in Brief:

            • AUD up against USD,EUR, JPY, NZD and CHF
            • AUD down against GBP and CAD
            • Aussie Jobs numbers positive and unemployment steady at 5.8%
            • Chinese data prints above expectations
            • BOE unexpectedly leaves rates on hold and GBP rallies 
            • BOC leave rates on hold as expected
            US data prints above expectations

Market Events Due:

          • AUD Monetary Policy Meeting Minutes (Tue)
          • GBP CPI (Tue) Retail Sales (Thur) Manufacturing PMI (Fri)
          • EUR German ZEW Economic Sentiment (Tue) ECB Press Conference (Thur)
          • USD Building Permits (Tue) Philly Fed Manufacturing Index and Unemployment  Claims (Thur)
          CAD Core CPI and Core Retail Sales (Fri)


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AUDUSD: The AUD closed the week only 10 points higher. At one stage it briefly surpassed the pre Brexit high to post a fresh 2.5 month high before falling 100 points. Positive local data and out of China gave the AUD a boost before better than expected data out of the US saw the AUD give up those gains. Ironically the AUD has closed higher for the last 7 weeks as some of the weekly gains have been tiny. Resistance sits 100 points higher and we are right on the support levels of the 7 week upward channel. 

AUDEUR: The AUD closed marginally higher to post a fresh 3 month high against the EUR, up 7% in 8 weeks. It has spent the last 4 days around this level which suggests it is running out of steam on the daily charts. As stated in last weeks report there is solid resistance at this level as the last 3 times it was here we saw significant corrections. The ECB has its first Post Brexit meeting Thursday night so if there is anything out of the ordinary we could see some fireworks. 

AUDGBP: The AUD had its first down week in 4 against the GBP after posting a fresh 32 month high on Monday. The AUD closed down 2% after being down 3.5% at one stage. The BOE left rates on hold which was against market expectations for their first rate cut in 7 years which helped give the GBP more momentum. There is plenty of data out of the UK this week so anything missing the mark will be sure to add volatility.

AUDNZD: The AUD had a solid 3% rally against the Kiwi this week to post a 5 week high after hitting a fresh 15 month low the week before. It's had 6 up days in a row and there will be solid resistance at this level.    

AUDJPY: The AUD closed solid 4.5% higher against the JPY after being up a staggering 7% at one stage. All Japanese data printed below expectations and after Prime Minister Shinzo Abe was re elected with a crushing victory last Sunday 11th he has ordered a long awaited new round of fiscal stimulus spending. Abe met with former Federal Reserve chairman Ben Bernanke on Tuesday and also asked his Economy Minister Nobuteru Ishihara to compile a stimulus package by the end of July that capitalises on low rates for government borrowers, and may include construction bonds.This has fed market interest in a large fiscal stimulus program that would represent the latest iteration of Abenomics. The Bank of Japan moved to negative interest rates in January, but any benefits of the contentious policy move have been countered by the appreciation of the Japanese yen. Some analysts believe Japan could be ready to test helicopter money, a direct form of stimulus.

Compass Global Markets Team.

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