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Andro Matugas-Barnes
Jan 09 2019

TAT FX Brief: Jan19

News & Insights
TAT FX Brief: Jan19
<blockquote> <p>The Australian Dollar adapted well over the second half of 2018, holding out on the low 70s; especially with the global markets getting rocked over the last quarter.</p> </blockquote> <p>To open the New Year, as very short-lived drop of a few cents to a decade low of .673 cents last week did give us a sight&nbsp;of what the AUD could trend to as the year progresses. But with most of the world being on holiday mode,&nbsp;markets are prone to volatility, where we saw the fall quickly reversed, bouncing&nbsp;back into the low 70s&hellip;Will&nbsp;that hold? What does that say for the AUD in 2019? Will you be impacted and ready for the AUD to be in the&nbsp;.60s?</p> <p>Yes, the US Federal reserve did raise their interest rates last year:&nbsp;rather than AUD declining, it has been quite&nbsp;stable. A large factor in this relative stability has been the consistency of monetary policy, with the Reserve&nbsp;Bank&#39;s official cash rate target sitting at a record low of 1.5 per cent and little sign of it moving in the short&nbsp;term.</p> <blockquote> <p>Can the AUD maintain its steady run in 2019? Will the Reserve Bank be able to fulfil its medium-term&nbsp;goal of raising interest rates back up from record lows, or might it even have to cut them again?&nbsp;</p> </blockquote> <p><strong>2019 could be the turning point for RBA, but&nbsp;highly unlikely they will increase the cash rate, while house prices&nbsp;are falling. The AUD is likely to weaken, below the 0.70, before it strengthens back to a stable 0.75 by the end&nbsp;of the year.&nbsp;</strong></p> <ul> <li>AUD/USD</li> </ul> <p>AUD rose against most of the majors on Monday, which added to the gains from last week. Rather than the&nbsp;drive coming from the AUD strength, it was more to a general USD weakness.&nbsp;</p> <p>The weakness of the USD climbed to 0.7150. The AUD has no real impact in this week&rsquo;s economic calendar, and&nbsp;won&rsquo;t see anything meaningful until Friday Retail Sales. The AUD will be left to continue struggling alongside&nbsp;broader market sentiment, though AUD/USD is currently pinning into a major support/resistance level that has&nbsp;been the ongoing theme over the last 3 months.</p> <p>While the AUD softened against the USD in the last 24hrs, ongoing optimism towards trade negotiations&nbsp;between the US and China helped it gain against most of the major crosses.</p> <ul> <li>AUD/EUR</li> </ul> <p>Bearish momentum has dominated the EUR against AUD since the beginning of last month. The currency pair&nbsp;has dropped over 6.70%, since it gained from top border of the channel pattern back in Dec 3.</p> <p>Currently the pair is training near the mid .62s, and is looking to keep heading back towards the 0.63s.&nbsp;However, if the support level formed by the weekly PP holds, the pair may say where it currently is.</p> <ul> <li>AUD/GBP</li> </ul> <p>The AUD/GBP will start the new week trading at 0.5595, having risen over 0.6% during the previous, highly&nbsp;volatile, week.</p> <p>Last week the exchange rate fell temporarily to below 0.5470 during&nbsp;a flash-crash&nbsp;event that saw the AUD&nbsp;was hit particularly hard, although the GBP gains were almost as quickly returned to us, once the market&nbsp;calmed down.</p> <p>The pair is in a short-term downtrend consistent with a longer-term underperformance by the AUD. However,&nbsp;there are notable technical levels at hand, which are likely to present obstacles to further downside.</p> <p>Overall, we are mildly bearish, although to gain confidence, we would first like to see a support at the 0.5470&nbsp;lows, where it fell during the flash-crash. If it breaks below, it would open the way to a continuation of the&nbsp;bearish trend down to the next target at 0.5464, followed by 0.5434.</p> <ul> <li>AUD/CNY</li> </ul> <p>The AUD was lifted Monday by a surprise injection of stimulus into the Chinese economy, and is likely to edge&nbsp;steadily higher over coming days, as well as through the rest of 2019. It appreciated as a surprise cut in&nbsp;the&nbsp;RRR&nbsp;in China, together with a demonstration of sensitivity to market concerns from the Fed;&nbsp;drove a short&nbsp;squeeze. With little data out, the AUD will be at the mercy of sentiment.</p> <p>The reserve cut matters for the AUD because the currency is underwritten by Australia&#39;s mammoth commodity&nbsp;trade with China, which has seen the Antipodean unit develop a close correlation with the Chinese currency.&nbsp;CNY was boosted Monday by the stimulus announcement, and currency pairs remain around 4.8943.</p> <ul> <li>AUD/INR</li> </ul> <p>With the INR strongly correlated to the price of oil in 2018, the rupee typically loses value when oil prices climb: due to India&rsquo;s status as one of the world&rsquo;s largest oil importer.</p> <p>According to US Credit Rating agency Fitch &ldquo;Fitch Ratings has predicted the INR to weaken to ?75 [per USD]&nbsp;by the end of 2019 on a widening current account deficit and tighter global financing conditions.&rdquo;</p> <p>Currently, AUD/INR is currently at 50.333, and has been rising since the beginning of 2019.</p> <p><strong>Major events/data this month:</strong></p> <p><img alt="FX-Events-Jan-2019" src="https://tat.capital/docs/uploads/2019/01/jan2019-fx-events.png " /></p> <p><span style="font-size:8px">Source:&nbsp;Economic Calendar -&nbsp;<a href="https://www.investing.com/economic-calendar/" target="_blank">investing.com</a></span></p> <p><strong>Useful links:</strong></p> <p><a href="https://tat.capital/Home/FX" target="_blank">Setup FX Account</a>&nbsp;|&nbsp;<a href="https://www.bizcurrency1.com/GPWeb/Pages/General/Login.aspx?Style=TAT" target="_blank">FX Login</a></p> <p><a href="https://tat.capital/Blogs/Permalink/how-to-choose-an-fx-broker" target="_blank">How to choose an FX broker for your business</a></p>

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