AUD/USD
AUD seems to be hanging by a thread as the pair stayed within a tight range overnight, currently trading at 0.6938.
U.S. President Donald Trump insisted yesterday that trade talks with China had not collapsed and called the widening U.S.-China tariff war "a little squabble" as his administration readies 25% duties on all remaining Chinese imports. Markets remain sensitive of further news as U.S. and Chinese officials said the two countries would continue to negotiate on trade.
However, currencies like AUD will not provide a safe holding destination during prolonged uncertainty over whether an agreement is likely to eventuate. Safe-haven currencies, including the dollar and the Japanese yen are benefiting the most from their counterparts.
The Melbourne Institute and Westpac Bank Consumer Sentiment Index for Australia is due today (10.30am AEST) with the forecast slightly below the previous reading. The index increased by 1.9 percent month-over-month to 100.7 in April 2019 from 98.8 in the previous month, boosted by the 2019 Federal Budget, with tax relief again being a key feature (Trading Economics).
AUD/USD Daily Chart
A new 4-month low is set after the 61.8 Fib of the 0.6715-0.7295 Fib is briefly pierced. Daily RSI diverges from the low whereas monthly RSI is biased down.
The pair continues to hold well below the key 0.7000 region and a bounce from the current support (0.6935) is required for any sign of a reversal. Signals are currently mixed.
EUR/USD
The EUR dropped against the USD overnight, currently at 1.1207, after Italy’s deputy prime minister said the country is ready to break European Union budget rules on debt levels if necessary to spur employment (Reuters). This is a clear indication that the Italian government is more concerned about employment growth than debt ratios/limits and will go to great lengths to ensure his country is in a better position.
These comments will continue to hurt the EUR because such measures safeguard the stability of the euro zone and provide a buffer for banks to remain solvent. Salvini's coalition partner, Luigi Di Maio, later told reporters that it was "pretty irresponsible" to create market tensions by speaking about increasing Italy's high debt level.
The threat of tariffs on imported cars and auto parts remain a focus and concern for investors as U.S. talks continue with the European Union and Japan.
Across the channel, GBP dipped further to 1.2902, a two-week low as a result of poor employment data showing wage growth in the quarter ending March was lower than expected, signaling the possible start of a turbulent period for the broader economy. In addition, Britain’s exit from the European Union continues to weigh on the Pound as leadership questions add further uncertainty for progression.
EUR/USD Daily Chart
As mentioned yesterday, the daily close back below the 30-DMA has weakened the underlying market structure and signaled a market top. The 55-DMA and upper channel line caps the recent rally and a slide ensues, whereas the 21 & 10-DMAs get pierced. Bear sentiment grows slightly with Monthly doji candles and the magnetic 61.8% Fib of 1.0340-1.2556 help keep price action limited. Signals are currently not clear.
Risk Disclaimer
The information above is of general nature only and does not take into consideration your objectives, financial situation or investment needs. The products and services provided are issued by AETOS Capital Group Pty. Ltd. (AFSL: 313016, ACN: 125113117). Trading Forex margin and CFDs carries a high level of risk, and losses can exceed your deposits. You are strongly recommended to seek independent financial advice before you make an investment decision. Please refer to our Product Disclosure Statement which you can obtain from our website for more details. AETOS has the ownership of the contents of this FX commentary. Copying, reprinting or publishing to a third party is not permitted.