AUD: A$ Outperforms On Cautious RBA Easing, Wages Coming Up
While the G10 fell against the US dollar (USD BBDXY +0.2%), which was boosted by higher yields, AUDUSD was only slightly lower at 0.6352. RBA Governor Bullock’s warning not to expect a series of rate cuts supported the Aussie as did stronger equities.
- The bull theme remains intact as AUDUSD continues to hold above key resistance at 0.6331. The move above this level highlighted a stronger reversal and opened up resistance at 0.6414. Initial support is at 0.6305, 50-day EMA.
- Kiwi underperformed on Tuesday ahead of today’s RBNZ decision. In contrast to the RBA’s cautious 25bp cut, the RBNZ is unanimously expected to ease by another 50bp which would bring the total to 175bp. As a result, AUDNZD returned above 1.11 and is now up 0.5% at 1.1135.
- AUDJPY is 0.3% higher at 96.60. AUDEUR rose 0.3% to 0.6080, close to the intraday high. AUDGBP is moderately higher at 0.5038 after a high of 0.5051.
- Equities were stronger with the S&P up 0.2% and Euro stoxx +0.25%. Oil also rallied with Brent +0.7% to $75.75/bbl. Copper fell 1.7% though while iron ore is higher at around $107/t.
- Today Q4 wages print and are expected to rise 0.8% q/q and 3.2% y/y down from 3.5% in Q3. Westpac’s leading index for January is also released.
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AUD: A$ Rallies On US-China News, AUDUSD Holding Around 62c
The G10 were down against the US dollar on Friday but the Aussie was one of the better performers as risk appetite improved following news that President-elect Trump had requested a trip to China to meet President Xi signalling possibly better-than-expected relations between the two. AUDUSD rose to 0.6227 on the news before trending lower to 0.6193 to be down 0.3% on Friday. It is currently around 62c. The USD index rose 0.3%.
- The bearish trend in AUDUSD continues with lower lows and lower highs. Moving-average studies are also in a bear mode. On Friday the pair fell to 0.6165. Initial support is at 0.6131, January 13 low, and resistance at 0.6233, 20-day EMA.
- With the yen underperforming in the better risk environment, AUDJPY rose 0.4% to 96.79 after a high of 97.17. AUDNZD is 0.1% higher at 1.1092 after a low of 1.1065. AUDEUR was down slightly at 0.6029. AUDGBP is 0.2% higher at 0.5089.
- Equities rallied with the S&P up 1% and Euro stoxx +0.8%. Oil prices were lower with Brent falling 0.7% to $80.79/bbl. Copper fell 2% on Friday while LME base metals rose 1.9% on the week. Iron ore is around $101.50/t.
- Today there are no data or events in Australia.
USD: Goldman Sachs On USD - Volatility Likely To Pick Up, But Firmer USD Outlook
Goldman Sachs: "USD: Into the storm. We expect that coming US policy changes will add to the case for Dollar strength, even beyond the strong asset returns that have proven a high bar to beat in recent years. That said, we see some near-term risks given the market's building expectation for quick action on tariffs, and the Dollar's demonstrated proclivity to weaken on signs of a more graduated approach to tariffs. We think investors are probably taking “Day 1” pledges too literally; while it has become common for presidents to sign some executive orders on the first day, these are often more symbolic or aimed at rolling back policies from the previous administration. And it is not just investors that are expecting a clear signal from next week. For example, the Bank of Japan cited uncertainty around the incoming US administration’s policies as one factor impacting its decision to keep rates steady in December. This strikes us as overly optimistic for a quick resolution of that uncertainty. While the president can take relatively quick action on trade under a range of existing authorities, there are a number of measures that our economists expect to be seriously considered but ultimately not enacted. That implies a series of back-and-forth headlines, just like last time. Rather than next week bringing clarity, we think the storm is just rolling in. We expect it will pay to be patient."
