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Global Market Update
The View from Australia

by Craig Killaby | July 18, 2021



> NZ Q2 CPI : 1.3% v. 0.7% exp.

> JP BOJ Outlook Report and Rate Decision : -0.10% v. -0.10% exp. (no change)

> US June Core Retail Sales & H/line Retail Sales : 1.3% & 0.6% v. 0.4% & -0.4% exp.

> US July Prelim UoM Consumer Sentiment : 80.8 v. 86.5 exp.


Weekend Headlines (BBG)

> COVID19 restrictions across NSW were tightened on Sunday, with the entire economy now in a standstill as the caseloads remain elevated

> OPEC+ has come to an agreement to increase production in an effort to slow the fast rising price as demand starts to come back into the market on the global reopening with August production hikes targeted

> US-China tensions are back to the forefront as US President Biden warned against those companies operating in Hong Kong as China’s hold on the region tightens

What you need to know

It was a tough week for the AUDUSD as risk appetite seemed to be slowly being easing as rising COVID19 caseloads and potential inflation risks take over. The data on Friday was light, however the NZ CPI numbers for Q2 were the main event, as inflation beat sharply to the upside and saw investors bring forward rate hike expectations from the RBNZ following their decision to remove their QE program at the end of the month. NZDUSD was elevated on the print, hitting a high of 0.7029 before trickling lower throughout the session.


Locally, the AUD seems to be weighed down by the widespread lockdowns across VIC and NSW as the population struggles with the spread of the Delta variant amidst a very poor push for vaccinations. AUDUSD touched another YTD low of 0.7392, with the move lower in US equity markets late Friday pushing the pair lower. US/China tensions came back into the picture, with US President Biden taking shots at China warning businesses from operating in Hong Kong, seeing USDCNH break higher. The retail data in the US printed to the upside, far exceeding street estimates in June and showing that the reopening is seeing US consumers spend. However, despite the strong retail spending numbers, consumer sentiment seems to have dropped in July as the health of the recovery worries investors.


US equity markets struggled to close out the week, as the S&P500 closed the session down 0.75% and may be bracing for a correction lower. AUD crosses are mostly lower, with AUDNZD down 0.6% as the NZD outperformed following the rate hike expectations ramping up. Commodity markets are mixed, with Gold struggling on the move into the USD while WTI crude is due for a strong pullback to kick off the week following the OPEC+ news over the weekend.


The Day Ahead




> UK BOE Member Haskel to speak  

> EU July German Buba Monthly Report


Today’s data docket is light, however the strict actions from the NSW government over the weekend banning all non-essential retail and the strong move of stopping construction is likely to weigh on the AUD to kick off the week. The NSW COVID19 case numbers do not seem to be getting much better, so a prolonged lockdown is expected as the virus spreads to other states. The data highlight for the AUD will come tomorrow morning as markets will get the release of the July meeting minutes from the RBA, where there were slight changes to policy.


Not expecting major movement following this, as the unexpected virus situation across Australia will fundamentally change their forecasts. The ECB meeting on Thursday will be the key data event, with the level of stimulus to be provided to the EU economy as it reopens the important takeaway for investors. Will keep a close eye on the price of WTI crude throughout the session, while US futures markets will also be watched with a very light data day in Asia.


Range Today : 0.7390 – 0.7440


AUD/USD Technicals


Lower highs and lower lows is the theme as the pair becomes entrenched in a downtrend as risk sentiment takes a turn for the worse heading into the back half of 2021. The 0.7400 handle is key in early trading, with choppy moves expected as per usual on Monday mornings. After a 1.3% drop for the week, the pair looks poised to break lower as prospects of AU growth takes a hit on the lockdowns. 0.7392, the intraday low on Friday will be the target on an early selloff, with little holding up the pair between current spot and 0.7250. EXP200DMA at 0.7444 will be the upside target.

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