TAT FX Brief: Jan19
News & Insights

<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 of what the AUD could trend to as the year progresses. But with most of the world being on holiday mode, markets are prone to volatility, where we saw the fall quickly reversed, bouncing back into the low 70s…Will that hold? What does that say for the AUD in 2019? Will you be impacted and ready for the AUD to be in the .60s?</p>
<p>Yes, the US Federal reserve did raise their interest rates last year: rather than AUD declining, it has been quite stable. A large factor in this relative stability has been the consistency of monetary policy, with the Reserve Bank's official cash rate target sitting at a record low of 1.5 per cent and little sign of it moving in the short term.</p>
<blockquote>
<p>Can the AUD maintain its steady run in 2019? Will the Reserve Bank be able to fulfil its medium-term goal of raising interest rates back up from record lows, or might it even have to cut them again? </p>
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<p><strong>2019 could be the turning point for RBA, but highly unlikely they will increase the cash rate, while house prices are falling. The AUD is likely to weaken, below the 0.70, before it strengthens back to a stable 0.75 by the end of the year. </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 drive coming from the AUD strength, it was more to a general USD weakness. </p>
<p>The weakness of the USD climbed to 0.7150. The AUD has no real impact in this week’s economic calendar, and won’t see anything meaningful until Friday Retail Sales. The AUD will be left to continue struggling alongside broader market sentiment, though AUD/USD is currently pinning into a major support/resistance level that has 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 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 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. 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 volatile, week.</p>
<p>Last week the exchange rate fell temporarily to below 0.5470 during a flash-crash event that saw the AUD was hit particularly hard, although the GBP gains were almost as quickly returned to us, once the market calmed down.</p>
<p>The pair is in a short-term downtrend consistent with a longer-term underperformance by the AUD. However, 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 lows, where it fell during the flash-crash. If it breaks below, it would open the way to a continuation of the 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 steadily higher over coming days, as well as through the rest of 2019. It appreciated as a surprise cut in the RRR in China, together with a demonstration of sensitivity to market concerns from the Fed; drove a short 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's mammoth commodity trade with China, which has seen the Antipodean unit develop a close correlation with the Chinese currency. 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’s status as one of the world’s largest oil importer.</p>
<p>According to US Credit Rating agency Fitch “Fitch Ratings has predicted the INR to weaken to ?75 [per USD] by the end of 2019 on a widening current account deficit and tighter global financing conditions.”</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: Economic Calendar - <a href="https://www.investing.com/economic-calendar/" target="_blank">investing.com</a></span></p>
<p><strong>Useful links:</strong></p>
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<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>