Compass Global Markets' Blog

29th August 2016 - Weekly Currency Market Report.

Posted by Thomas Su on August 29, 2016 at 11:08 AM

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The Market in Brief:

                        • AUD down V USD, GBP and NZD and up V EUR, JPY, CHF and CAD
                        • GBP data as expected and the best performing currency of the week
                        • USD Hawkish speech by Janet Yellen sees USD strengthen Friday night whilst US data prints above expectations
                        German data disappoints

Market Events Due:

                      • AUD Building Approvals (Tue) Private Capital Expenditure and Retail Sales (Thur)
                      • USD CB Consumer Confidence ADP Non-Farm Employment Change (Wed) ISM Manufacturing PMI Non Farm Payrolls and Unemployment Rate (Fri)
                      • GBP Manufacturing PMI (Thur) Construction PMI (Fri)
                      CNY Caixin Manufacturing PMI (Thur)


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AUDUSD: The AUD had its second consecutive down week against the USD, closing 0.5% lower than Mondays open. Friday was very volatile with the AUD looking like it was going to finish the week up before falling 1.75% in 5 hours. Earlier in the week US data printed above expectations but it was Janet Yellen's hawkish speech at midnight that saw the USD strengthen across the board. The chances of a Fed rate hike are now 30% for September and 60% for December.  So the solid resistance that has held in place since April remained intact. Importers need a 2% rally to get an another opportunity at these levels. On the flip side those looking to buy AUD have their best opportunity in 18 trading days. Plenty of data this week for both currencies with the big one the US non farm payrolls on Friday night so expect volatility.

AUDEUR: The AUD closed the week 0.5% higher against the EUR after being almost 1.5% higher Friday night. Those looking to buy AUD can target the short term support 0.5% lower whilst importers can target levels 2% higher that have held as resistance since last November. 

AUDGBP: As forecast the GBP finished its second consecutive week higher against the AUD, up another 1%, with GBP being the best performing major of the week. UK data printed as expected with more important data to come this Thursday and Friday. There is short term support here for AUDGBP  but if it breaks those looking to buy AUD can target 1.5% lower which is the post Brexit low. 

AUDNZD: AUD had its 3rd consecutive week down against the Kiwi, closing 0.5% lower. On Thursday it hit a fresh 6 week low which represents a great opportunity for those looking to buy AUD. We were expecting expecting it to bounce as over the medium term when it has been down here we have seen some solid rallies. Last Tuesday RBNZ Governor Graeme Wheeler published a speech which outlined reasons he doesn't see the need to take a "slash and burn" approach to interest rates. This was not what the market was expecting as there was an an expectation there would be 2 more cuts in the cash rate over the next 8 months. 

AUDJPY: The AUD closed the week 0.5% higher after 5 consecutive down weeks against the JPY. The short term support managed to remain intact. Prime Minister Shinjo Abe's failure to introduce the stimulus the market is expecting has kept the JPY strong. It seems it is only a matter of time before this happens but "when" nobody knows.

AUDCHF: After being down 3.5% in 8 trading days the AUD managed to close the week around 1% higher against the CHF. Importers can target levels 2.5% higher at the medium term resistance which has held for the last 5 weeks and over the longer term the last 16 months. 

Compass Global Markets Team.

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