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Global Market Update
The View from Australia

Craig Killaby April 14, 2019

Data/Speakers

 

> CN March Trade Balance : 221B v. 2B exp.

> CN March New Loans : 1690B v. 1223B exp. (Yuan terms)

> US March Import Prices : 0.6% v. 0.4% exp.

> US March Prelim UoM Consumer Sentiment & Inflation Expectations : 96.9 & 2.4% v.  98.1 & 2.5% exp.

 

Weekend Headlines (BBG)

 

>  President Trump slammed the Federal Reserve again, tweeting Sunday that the stock market would be “5000 to 10,000” points higher had it not been for the actions of the U.S. central bank.

>  The U.S. is open to facing “repercussions” if it doesn’t live up to its commitments in a potential trade deal with China, Treasury Secretary Steven Mnuchin said, adding that the two countries are making progress in talks to end their nine-month trade and tariff war.

 

What you need to know

 

The range break that AUD bulls were after occurred late on Friday night, as the market chose to focus on the data story coming from the China as opposed to the cautious tone from the RBA’s stability report. The trade data coming out of China showed exports jumping over 14% in March, however imports fell leading to a trade surplus substantially larger than market estimates. The reaction on currency markets was limited following the data, as local AUD traders awaited the stability report from the RBA shortly after. As expected, the report showed that the RBA is concerned with the continued downturn in the housing sector and its impact on consumer consumption. There was really no surprises from the report, and the overall effect on the AUDUSD was limited. Market movement occurred a touch later in the session as the lending figures from China showed that the banks have been generous in their lending for Q1 and hopefully a sign of a further pickup from the nation. It was a significant bout of risk appetite that came across markets, as risk assets major benefactors of the price action. The Dollar was down 0.25% in DXY terms, with the AUD and the NZD the best performers across the majors. AUD crosses also looking much better to open the trading week, with AUDJPY the biggest winner up 1% as the JPY was hit on the flows away from havens. US equity markets having a very strong finish to the week, with the positive signs circling the US/China trade story providing a good base to run higher. UST yields also rising across the curve as the 10y yield was up a whopping 6.8bp. In commodities, both Iron Ore and Copper finished up over 1% from Friday’s opening prices. Both WTI crude and Gold are off to start the week, down 0.35% and 0.1% respectively.

 

The Day Ahead

 

Data

 

> EU German Buba Monthly Report

> US FOMC Member Evans to speak

> US Empire State Manufacturing Index : 8.1 exp.

> US FOMC Member Evans to speak

 

We can expect a quiet start to the week in APAC, however with the AUD breaking its recent range there may be some room for another crack at the 0.7200 level or at the very least the 200SMA now sitting at 0.7193. The data calendar is relatively light today, however there is a fair bit of risk on the cards with the highlights for APAC coming from the RBA’s meeting minutes tomorrow and the AU employment on Thursday. As always, any sort of headlines on the US/China trade talks will be watched closely while the offshore data risk will likely come from the US retail report on Thursday night.

 

Range for the day : 0.7140 – 0.7195

 

AUD/USD Technicals

 

The Aussie right at a key inflection point now – the 200 day SMA and trend line resistance at 0.7190/00. A break up through here will spur on a round of short covering and large funds will be active hedges should it crack. A daily close will be the key and even better if we see a weekly. AUDJPY has broken through its 200 day SMA and along with a break higher in the S&P 500, provides the kind of risk on sentiment that could drive the AUD higher in the near term. The break has to happen first as always so slight bias to sell in to 0.7190/00 until we get some key data catalysts later in the week – RBA mins, China GDP and US retail Sales. Target on a break will be 0.7500. Support at 0.7160, 0.7120/30 as we start the week.

 

Technical Analysis written by APAC Head of Treasury Richard Breen

 

 

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