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USD data turns sharply

Published February 18, 2019

by Nicholas Cork

While other factors may have contributed to Thursday nights dour US retail sales numbers, Friday nights very weak US industrial production release confirmed the recent run of relatively strong US data had reversed sharply. The USD fell across the major currencies but most against the commodity currencies, with AUD as a result testing 0.7250 and most AUDcrosses are trading higher to start the week. Some hope again for a trade breakthrough as China’s state news agency Xinhua reports China and the US reached a consensus in principle on some key issues during the China talks, and they now move back across to Washington to reconvene this week and again we await some hints. The focus in the US now is on Trumps national emergency and how this will play out over the course of the week.

Although EURO finished the session higher after testing November lows earlier in the day, doubts remain as ECB member Benoit Coeure described a “clearly stronger and broader” euro-area slowdown than expected, and the snap Spanish election called on the weekend will start to bring the PIIGS back into focus again and potentially weigh on sentiment. Geopolitical issues are again on the rise as a visible divide is opening up between Europe and the US on the way forward with Iran, and Trump is also goading Europe via Twitter to take the 600 captured ISIS soldiers. Not much new in the Brexit disaster except May continuing to plead to the opposition, and Porsche is warning UK customers of higher Brexit prices. Australia will commence talks on a free trade agreement with the UK on Mar 29 if a no deal Brexit is the way.

So although the AUD starts the week at the top of the recent well defined 0.7050/0.7150 range, it may take a removal of all risk factors to see it trade higher again.  RBA minutes are due tomorrow and unemployment on Thursday, and Gov Lowe’s testimony to parliament is on Friday.  In NZ they have dairy auctions on Wednesday. Major resistance remains at the 200 day moving average rate which is currently at 0.7270, and major support still lies at 0.7200.