Tuesday, June 16, 2020

AUD/USD Pair Bullish in the US Session

Tags

News shaping
the markets today

     

What’s happening: The Australian dollar recovered its losses for the day on Monday, after a volatile trading session.

What happened: The AUD/USD pair started the Asian session downbeat on Monday, dropping to its lowest level since the beginning of the month. The pair recovered its losses during the US forex trading session to settle higher, above the 0.6920 level.

The Aussie, which is seen by forex traders as a liquid proxy for risk sentiment, was down initially on worries of a rise in new covid-19 cases globally hampering the reopening of economies. The pair assumed a steady downturn in the early hours of the day on Monday, along with Asian equities, following China’s weak economic releases. The pair changed course later in the day, following the announcement made by the US Federal Reserve.

Why it matters: China being Australia’s largest trade partner, weak reports from the Asian country hit the Aussie. China reported a steep 6.3% decline in its fixed-asset investment for the January to May period, far worse than the consensus view of a 5.9% contraction. The country’s retail trade also fell 2.8% in May, following a 7.5% decline in the previous month, and worse than expectations for a 2% decline. Although industrial production rose 4.4% in May, it missed the forecast of 5% growth.

After reporting very few new covid-19 cases for around two months, Beijing reported a cluster of new cases in recent days. The overall risk sentiment was also hurt by a rise in new infections in various states of the US.

The AUD/USD pair fell as low as 0.6776 earlier in the spot forex trading session, after settling above the 0.6920 level in the US session, with Wall Street closing the day higher on the Fed’s announcement of buying individual corporate bonds.

The Reserve Bank of Australia released minutes from its latest meeting this morning. The minutes said that although the country had witnessed a massive contraction in economic output in March and April, the downturn could be “shallower than earlier expected.”

The country’s house prices data signaled lower-than-expected growth in the first quarter. The house price index rose 1.6% in the quarter, following 3.9% growth in the earlier period, coming in short of the consensus expectations of a 2.7% increase.

What to watch: The AUD/USD is expected to extend its advance today, with the pair trading higher in the Asian forex session today. The Australian dollar rose 0.3% to $0.6943 in the Asian session.

Traders await the Westpac-Melbourne Institute Leading Economic Index and new home sales data from Australia tomorrow, which could determine the fate of the forex pair.

The Markets Today

     

UK stocks will be in focus today, ahead of various economic reports scheduled for release later in the day.

Context: London’s index trading came under pressure and closed lower on Monday. A rise in new coronavirus cases in Beijing and downbeat economic data from China pushed forex and stock trading markets lower in the previous session.

Details: The two-month rally in the UK markets came to a grinding halt last week, after the US Federal Reserve released a grim economic outlook and the US reported a rise in new coronavirus cases.

UK stocks started the session on a significantly downbeat note on Monday, although mid-cap stocks helped markets recover from a three-week low earlier in the session.

BP’s stock led the decline for the commodity-heavy index, with shares falling more than 2% on Monday, after the company announced plans to write off around $17.5 billion of its assets.

The FTSE 100 closed lower by 0.7% on Monday, while the mid-cap FTSE 250 index finished mostly flat, with losses in mining and consumer shares being offset by financial and defensive sector stocks.

Travel-related stocks declined by 1.3%, with easyJet’s shares shedding more than 4% despite the airline company resuming flights for the first time since March 30.

Bunzl bucked the trend, gaining around 10%, after the business supplies distributor said it expects to report revenue growth in the first half of the year.

What to watch: Traders await the claimant count and unemployment rate reports from the UK. The number of people claiming jobless benefits, which climbed by 856,500 in April, is expected to increase by 400,000 in May. Analysts expect the UK unemployment rate to rise to 4.7% in April, from 3.9% in the previous month.

Investors also await the Bank of England’s meeting scheduled for Thursday, in which the bank is expected to leave its interest rate unchanged at 0.1%.

Markets will also keep an eye on the covid-19 numbers, with the total cases exceeding 8,015,500 globally with 436,310 deaths. Britain has recorded 298,310 cases with around 41,820 fatalities.

Other Markets: US indices trading closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.62%, 0.83% and 1.43%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s inflation rate, wholesale prices and ZEW indicator of economic sentiment, Eurozone’s Zew economic sentiment index, labour costs and wage growth, UAE’s inflation rate, Canada’s foreign stock investment, New Zealand’s global dairy trade price index, China’s foreign direct investment as well as the US retail sales, Redbook index, industrial production, capacity utilization, manufacturing production, NAHB housing market index, business inventories, API crude oil stocks and the Fed Chairman’s testimony.