Forex daily analysis from FIBO Group

[FIBOgroup]

17.03.2015 - Australian dollar awaits Fed rate decision

The Australian dollar remains flat today after disappointing factory data out of the US and the latest minutes release from the Reserve Bank of Australia.

At 6.13pm (AEDT) the Aussie dollar was trading at US76.38c down from US76.40c in yesterday’s trade.

U.S. industrial production increased 0.1 percent in February, less than the 0.2% expected by analysts although up from -0.3% in the previous month.

Industrial capacity utilization came in at 78.9 slightly below expectations 79.5 and down from 79.1 in the previous month.

The disappointing numbers lead some to believe, including BK Asset Management managing director Kathy Lien that The US Federal Reserve will be in no hurry to lift interest rates at their meeting scheduled for tomorrow,

"We had broad-based weakness in US data ... all surprising to the downside," she said

"All of this led investors to believe that the US Federal Reserve will be emphasizing patience at this week's meeting." She also added.

In the release of their latest minutes meeting today the RBA also weighed in on the US interest rate debate by noting that analysts and the US Fed see things differently on the timing of an interest rate rise,

“Market expectations for increases in the US federal funds rate had been brought forward over February, following better-than-expected employment data. It remained the case, however, that the markets implied future tightening of monetary policy was considerably more drawn out than the expectations of members of the Federal Open Market Committee”, the bank noted

Explaining their decision for keeping rates on hold this time round, the RBA noted that time was needed in order for the economy to reposition itself,

“In considering whether or not to reduce the cash rate further at this meeting, members saw benefit in allowing some time for the structure of interest rates and the economy to adjust to the earlier change” they said

“Taking account of all these factors, members judged it appropriate to hold the cash rate steady for the time being”, they also added

Leaving the door open for further rate cuts the central bank also noted that further rate cuts may be needed in order to keep the economy moving forward,

“Further easing over the period ahead may be appropriate to foster sustainable growth in demand while maintaining inflation consistent with the target.”

 

[FIBOgroup]

18.03.2015 - Australian dollar in US Feds hands

The Australian dollar is sitting tight today as the market awaits the latest Federal Reserve meeting with the focus on the timing of an interest rate rise.

At 5.23pm (AEDT) the Aussie dollar was trading at US76.11c slightly down from Us76.20 in Yesterdays close.

A growing number of Analysts are now predicting that the US central bank will lift interest rates in June as the US economy gathers momentum, which will mark the first move in 7 years.

Peter Hooper of Deutsche Bank noted that the Fed may drop the word “patient” from their statement, but will still remain neutral and asses the need for an interest rate rise on a meeting by meeting basis,
“The strong consensus is that they will decide to drop the patient language. Janet Yellen made this clear in a testimony some weeks ago” he said

Although the tone of the meeting may be slightly hawkish, Inflation is still causing a headache for the Fed as slow wage growth, lower oil prices and a strong US dollar, which makes imported goods for American consumers cheaper, create a fear that prices may fall even further.

“It does open the door also to a rate hike this summer - either June or September. However, Janet will say so in the press conference tomorrow that this opens the door for June, but June is not necessarily the most likely, they need to see some more data”. Mr Hooper noted

 

[FIBOgroup]

26/03/2015 - Australian dollar steady as another rate cut looms
The Australian dollar has drifted higher today on the back of disappointing data out of the US yesterday.

At 7.26am (GMT) the Aussie dollar was trading at US78.75c up from US78.45c in yesterdays close.

Orders for durable goods fell to a seasonally adjusted -1.4 per cent in February from the previous month, the Commerce Department reported on Wednesday. Excluding transportation orders the figure fell -0.4 per cent, racking up 5 months of continuous declines.

Although the numbers were disappointing there were some external factors at play like the unusually harsh winter that has appeared for the second consecutive year,

"You hate to blame it on weather for the second year in a row, but it has been the second year where it's been unusually cold," said Michael Feroli, chief U.S. economist at J.P. Morgan Chase.

"First quarter of last year people were skeptical of that, but then we saw in the second and third quarters a pretty strong rebound, which I think was consistent with weather being a drag." he said

Jeremy Cunningham, senior portfolio manager for fixed income investments at AllianceBernstein,,also brushed off the disappointing figures by noting that the US is still on the road to recovery as inflation picks up and the job market gathers momentum,

"We see inflation in the US moving back to the Fed's target of 2 per cent as the economy gathers momentum and, importantly, the labor markets continue to strengthen," he said.

"The Fed place a high level of importance on the relationship between inflation and the US labour market performance." He added

The market is now pricing in a 68% chance that the Reserve Bank of Australia will cut rates again in April by 25 basis points up from 42% the day before the release of the US Feds latest policy meeting which shows the RBA may becoming a little nervous on the US central banks wait and see approach on lifting interest rate

 

[FIBOgroup]

Australian dollar tumbles along with iron ore, recession possible

The Australian dollar is sharply lower in today’s trading as iron ore hit a fresh 6 year low leaving some analysts to predict the local economy will enter a recession in 2016

At 10.12am (GMT) the Aussie dollar was trading at US76.82c down from US77.50c at close of trade on Friday.

A slowdown in China’s property market is creating a headache for Australia’s biggest commodity slumping on Friday to around $US53.00 a tonne, more than 60% down from its 2014 high of $US135.27 a tonne.

With weak demand out of China, things are not looking good for the metal with some predicting like ANZ senior commodity analyst Daniel Hynes that we may not have seen the bottom yet,

"It's obviously under a fair bit of pressure with the Chinese steel market still weakening," he said

"To be honest, there aren't any indicators to suggest we've come getting close to the end of that trend." He also added.

Some analysts like to Vimal Gor, BT's Sydney-based head of fixed income predict that Australia has a 50% chance of entering a recession and the RBA will cut rates by 50 basis points to 1.75% leaving the door open to further cuts if necessary.

Australia has been able to avoid a recession for over 20 years due to the mining boom, but with that over the country may be vulnerable,

"I could easily build a scenario where the RBA cuts rates sub 1 per cent," Gor said in an interview on Friday. "There's a decent chance of recession in Australia. We haven't had one for a long time."

"I see us either stopping at 1.75 per cent or stopping at sub 1 per cent," he said. "If it's bad enough to take us below 1.75 per cent, it's bad enough to take us a long way." He added.

 

[FIBOgroup]

Australian dollar takes a tumble


The Australian dollar took a tumble today after the latest minutes meeting from the RBA where governor Glen Stevens noted that further interest rate cuts may be needed to stimulate the economy.

At 4.39pm (AEDT) the Australian dollar was trading at 76.90c after trading as high as US78.21c in yesterday’s trade.

The RBA noted that it was keeping an eye on inflation and further monetary easing may be needed in order to bring inflation up to the bank’s target rate

"The board judged that it was appropriate to hold interest rates steady for the time being, while accepting that further easing of policy may be appropriate over the period ahead to foster sustainable growth in demand and inflation consistent with the target. The board would continue to assess the case for such action at forthcoming meetings," the minutes said.

Speaking at a function in New York Mr Stevens retreated this position by noting that a rate reduction has to be considered depending on the state of the economy.

"Interest rates should be quite accommodative and the question of whether they should be reduced further has to be on the table,"

One of the main reasons keeping the RBA back from cutting interest rates is the skyrocketing real estate prices, which MR Stevens sees as an ever growing problem,

“It is hard to escape the conclusion Sydney prices – up by a third since 2012 – look rather exuberant." He noted

 

[FIBOgroup]

Australian dollar hits six year low

The Australian dollar hit a fresh six-year low today as worries over China and weak commodity prices took its toll on the currency.

After falling as low as US73.98c the Aussie dollar somewhat recovered to finish the day at US74.49c.

Iron ore, Australia’s biggest commodity fell below US$50 a tonne, marking the lowest level since April and bringing the total losses to 16% in just one week.

The Chinese stock market has dropped over 30% recently with some saying it is the beginning of a crash in the Chinese economy.

BK Asset Management managing director Kathy Lien said the Australian dollar was one of the biggest casualties after the problems with China as well as the drop in commodity prices.

“Investors fear that the Greek crisis, sell-off of Chinese equities and decline in commodity prices could lead to a more dramatic slowdown in (Australia’s economy,” she said.

Rabobank head of financial markets research for the Asian Pacific region Micheal Every said that we could see the Aussie dollar drop below US70c by years, end the story in China unfolds and the measures taken by the government backfire.

“Whatever the government is throwing at the market isn’t working. This is a serious problem for Australia, because where China leads, the Australian economy follows,” he said.

“The much larger story is what’s happening in the Chinese stock market,” he added.

 

[FIBOgroup]

Yellen crushes Aussie dollar

The Australian dollar tumbled yesterday as after a hawkish tone form Fed president Janet Yellen and an unexpected cut in interest rates from the Canadian central bank.

The Aussie dollar closed out the day at US73.70c down from US74.50c at Tuesdays close.

Yellen noted that the US economy was on the rise including a strong mobs market, which will keep the US central bank on track to raise rates this year.

BK Asset Management managing director Kathy Lien noted that the bullish testimony buoyed investors and sent them pouring into the US dollar.

"Not only did Yellen confirm that rates will rise this year but it is her view that waiting too long would mean rates would have to rise at a faster pace later," she said. "She prefers to start earlier to allow for a more gradual rate path. As a result every FOMC meeting this year including September is a live meeting at which the central bank could raise rates." she said.

Also hitting the Australian dollar yesterday was the decision by the Royal bank of Canada to cut interest rates from 0.75% down to 0.5% in the wake of falling commodity prices.

The reduction had a knock on affect to the Aussie dollar, as the Australian economy is also heavily reliant on commodities such as Iron ore and copper with fears that the trouble may spread locally.

 

[FIBOgroup]

AUD/USD daily report

The Australian dollar hit a new six-year low today weighed down by the fall in commodity prices such as Gold, which fell to US$1081 an ounce, its lowest level since March 2010.

The Aussie dollar reacted sharply falling to US73.27c before receiving some support and climbing back up to US73.80c.

The minutes meeting from the reserve bank of Australia tomorrow will be crucial to the direction of the Australian dollar with the currency likely to face stiff resistance at around the US73.82 mark on the daily chart, which was previously a strong support towards the end of last week.

We expect this resistance level to hold up and the Aussie dollar will find itself heading back towards a new 6 year low.

 

[FIBOgroup]

AUD/USD daily report

The Australian dollar pushed higher in overnight trade on the back of a weak US dollar but has since retreated breaking back down through the US74.00c mark to trade at around US 73.70c

After reaching, a high of US74.39c the Aussie dollar succumbed to selling pressure as the news of lower than expected Yearly CPI numbers, which came in at 1.7% against analysts’ expectations of 1.9%. There are now fears that the Australian economy is heading in the footsteps of the Canadian economy and that another interest rate cut is inevitable.

In fact, in the latest minutes meeting from the RBA governor Glen Stevens noted that further interest rates cuts were not off the table and the central bank will wait and see how the situation turns out.

As we wrote yesterday, the Australian dollar has found strong resistance at around the US73.85c level and is now trading well below this mark.

The currency will keep trying to make a run for this level and may even temporarily break it but we believe the bears will win the struggle and the Australian dollar will continue on its way down to a new 6 year low.

 

[FIBOgroup]

Australian dollar down on job numbers

The Australian Dollar dropped more than 0.8 percent against the US dollar after the latest jobless numbers sent mixed signals about the state of the economy.

The number of job positions created was 38,500 against analysts’ expectations for a number of 10,000 while the unemployment rate rose to 6.3% up from 6.1% in the previous month.

"Australia's unemployment was slightly higher but overall not a bad set of numbers , the labour force growing was encouraging," said Raiko Shareef, currency strategist at Bank of New Zealand in Wellington.

Although the numbers were slightly on the positive side, most traders feel that data out of Australia will become less relevant in the weeks ahead and attention will focus on the US as the country gears up to lift interest rates for the first time after the onset of the financial crisis.

The Australian dollar may make a run for the US74c mark again but with uncertainty surrounding commodity prices and the Chinese economy, as well as a forecast for a healthy nonfarm payrolls number from the US, we may see the Aussie dollar drift lower and end the week on a sour note.

 

[FIBOgroup]

Australian dollar stronger after Weak US jobs data

THE Australian dollar is trading near a three-week high in late trading today,following on from its gains last Friday after the latest US non-farm payrolls figure hit the market under expectations.

At 6.57pm (GMT) the local currency was trading at US74.11c up from a low of US73.53c on Friday.

The American economy added 215,000 jobs in July, which was just shy of expectations for a number of 229,000 while the unemployment rate came in at 5.3%, holding at a 7 year low.

BK Asset Management managing director Kathy Lien noted that while the number was a strong result, like any number above 200,000, the market was hoping for a little more. All things aside she also said that the result was still enough for the Fed to consider raising rates in September.

“If the Federal Reserve was looking for some improvement in the labour market, the release certainly met those expectations and yet the US dollar lost value against most of the major currencies,” she said.

“Not only does the report leave September lift-off on the table but we believe it hardens the case for tightening at the next monetary policy meeting.” She added.

 

[FIBOgroup]

Australian dollar awaits US Fed

The Australian dollar is steady in today’s trading a as the market awaits this week’s FOMC meeting from the US Federal reserve.

At 8.42am (GMT) the Aussie dollar was trading at US73.65c, remaining at the same level as Fridays close.

The recent move by the peoples bank of china to devaluate the Yuan has now put into question the timing of an interest rate hike from the Fed with fears a weaker Chinese currency may stoke inflation in the US with consumers and businesses flocking to purchase cheaper imported goods.

OzForex corporate dealer Matt Richardson said the fortunes of the Australian dollar lay with the US Federal Reserve and noted that the Australian dollar was finding support on the back of the uncertainty surrounding the interest rate decision,

"There is still a 50-50 expectation we will see a rate hike in September, but that probability has decreased since Tuesday last week,"Mr Richardson said.

Three of Australia’s biggest banks expect headwinds for the Aussie dollar in the nearest future on the back of higher rates in the US as well as the possibility of another devaluation by the Chinese government.

National Australia Bank expects the Australian dollar to finish the year at US70c before trading at a low of around US68c in the first half of 2016.

 

[FIBOgroup]

Australian dollar tumbles on Chinese fears

The Australian dollar was crushed yesterday almost breaking down through the US70c mark, as worries over China emerged after another big fall in the Chinese stock market.

After reaching a low of US70.12c the Aussie dollar has somewhat recovered to be trading at US71.79c 5pm(GMT).

China’s stock market fell another 8% yesterday, bringing its recent losses to 40% which is well within the definition of a bear market and leaving terrified investors exiting emerging markets and commodity currencies like the Australian dollar.

The market was moving so fast yesterday the traders found it difficult to place a trade with spreads on some of the major currencies reaching 30 pips .

As the Aussie dollar approached the US70c mark traders began to buy the currency as the feeling was it had fallen to far and they felt that they could snap up a bargain.

"It got caught up in the stock market volatility, exacerbated by thin liquidity as participants stepped back to the sidelines." Noted Commonwealth Bank of Australia's chief currency strategist Richard Grace.


"This helped offset the negative risk sentiment around the dollar and it has bounced back from that," Mr Grace said.