AETOS Market Commentary
03/06/2019
AUDUSD
The Aussie rose on Friday, closing at 0.6933(-29 pips) against the greenback. As it stands, the commodity pair holds above the monthly-low (0.6865) despite signs of slowing activity China, Australia’s largest trading partner, and the exchange rate may continue to congest over the coming days as the RBA insists that ‘a further decline in the unemployment rate would be consistent with achieving Australia's medium-term inflation target.’
It remains to be seen if the RBA will reduce the official cash rate (OCR) to a fresh record-low as recent data prints indicate a robust labor market, and Governor Philip Lowe & Co. may merely attempt to buy more time as ‘the central forecast scenario remained for progress to be made on the Bank's goals of reducing unemployment and returning inflation towards the midpoint of the target.’ In turn, more of the same from the RBA may ultimately keep AUD/USD afloat as the central bank appears to be in no rush to reestablish its rate cutting cycle.
Aussie traders will be focusing on the Caixin Manufacturing PMI data that will be released at 11:45 AEST for today.
AUDUSD Daily Chart
Based on the chart above, the AUD/USD rebound following the currency market flash-crash has been capped by the 200-Day SMA (0.7130), with the exchange rate marking another failed attempt to break/close above the moving average in April.
In turn, AUD/USD remains at risk of giving back the rebound from the 2019-low (0.6745) Next downside support will be set at around 0.6730, but will keep a close eye on the RSI as the oscillator bounces back from oversold territory, with the development raising the risk for a larger rebound in the aussie-dollar exchange rate.
GBPUSD
The cable pair appreciated to 1.2627(-21 pips) against the greenback on Friday. 2016's two dramatic continue dominating markets. US President Donald Trump has announced new tariffs on Mexico and the shockwaves are felt well beyond North America. The US will impose a 5% levy on all Mexican goods entering the US on June 10th, and the duties will rise to 25% in October if Mexico does not curb the inflow of migrants into the US.
The news exacerbated the risk-averse mood – triggered by the intensifying US-Sino trade spat – sending the greenback higher. The old-new front in trade wars has replaced Brexit & uncertainty as the dominant theme for GBP/USD. Members of the Conservative Party consider a "cull" in the leadership contest, limiting the number of contenders. There are over a dozen MPs who want to succeed incumbent PM May. While former foreign secretary Boris Johnson remains the leading candidate, he may face fierce competition.
Uncertainty weighs on the pound. In the UK, Nationwide's house price index disappointed with a drop of 0.2% in May, indicating jitters in the housing market. Mortgage approvals and net lending to individuals are due later, but the focus remains on politics. US data is of greater importance in recent days. US first-quarter GDP met expectations with an annualized increase of 3.1% but the inflation component was downgraded, casting doubts about the quality of growth and also raising the chances of a rate cut by the Federal Reserve. The central bank sees weak inflation as temporary.
Today's Core PCE figure – the Feds preferred gauge puts this theory to the test. US personal spending, personal income, and the final consumer confidence number from the University of Michigan will also be of interest.
As the month draws to a close, institutions will rush to adjust their portfolios and this may cause jitters. Overall, further developments on trade and in UK politics are set to dominate the price action.
GBPUSD 4 Hour Chart
The GBP/USD pair maintains the technical bearish stance edging lower for a fourth consecutive day. In the short-term and according to the 4 hours chart, the pair is also poised to extend its decline, as it's developing below a bearish 20 SMA(Red Line), while developing over 200 pips below an also bearish 200 EMA(Blue Line).
Technical indicators in the mentioned chart remain within negative levels, although lacking enough directional strength to confirm the next move. As mentioned on a previous update, the pair would need to break below the mentioned daily low, a strong static support level, to confirm a steeper decline ahead
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