Outlook for Australian and New Zealand Dollar Brightens Considerably as Gold, Silver and Copper Prices Start to Shine Again
The Australian Dollar (Currency:AUD) is looking strong on the global foreign exchange markets as we head into the London afternoon session:
- The Pound to Australian Dollar exchange rate is 0.26 pct higher on a day-to-day basis with GBP/EUR at 1.7069.
- The Euro to Australian Dollar exchange rate is 0.31 pct lower at 1.4557.
- The Australian Dollar to US Dollar exchange rate is 0.27 pct higher at 0.9167.
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Commodity prices recovering = good news for the Aus Dollar
Keep an eye on the commodity sector for insights into the performance of the Aus Dollar. There remains a strong correlation between the AUD's poor year and that of the commodity market selloff.
The commodity sector downturn could be ending:
- Silver is continuing with its recovery higher. "This is likely the beginning of a larger recovery, with scope for a return to the old trading floor near 26.00," says Luc Luyet at MIG Bank.
- Copper prices have hit a nine week high, the period of destocking in China appears to be over, at least for now which is showing an improvement in metals demand and also a stabilisation of growth in China over the coming months.
- Gold prices are recovering - "This now greatly weakens the bearish structure that had been so dominant over recent weeks. The bias now switches to a bullish one with scope for a return towards 1422.10," says Luyet.
Outlook for the Australian Dollar dominated by RBA decision minutes
The market is starting to look ahead to next week's release of the August RBA meeting minutes, from which we can expect more dovish rhetoric amid weak Australian growth.
"The Minutes from the August RBA Board meeting will be released on Tuesday. However given we received a detailed update on the RBA’s current assessment of the economy and economic forecasts in its Statement on Monetary Policy, we expect little new information," say ANZ Research.
ANZ say they will look at DEEWR job vacancies data for July on Wednesday to confirm recent moderate weakening in job advertising and for signs of improvement in labour demand in the non-mining sectors of the economy given the series has a good industry breakdown.
Commenting on the Aus Dollar's technical outlook Emmanuel Ng at OCBC Bank says:
"Expect the AUD-USD to remain sidelined although slightly firmer commodity prices may yield support for the pair at the margins. The 55-day MA (0.9238) continues to remain remains unmolested while dips may see support towards 0.9060 and then at 0.9000."
Australian Dollar's declines against the NZ Dollar cease
The Australian Dollar versus New Zealand Dollar exchange rate remains supported for now. AUD/NZD is currently trading 0.21 pct higher at 1.1351.
Commenting on AUD/NZD FX Market Alerts tell clients:
"Further declined to break the 1.1300 level reached the 1.1277 low ahead of a bounce to leave the 1.1267/64 support intact.
"However, the upside is still limited and we see resistance at 1.1400/10 then the 1.1452/62 highs. Would need lift over this to trigger stronger recovery to 1.1542 then 1.1588 high."
New Zealand Dollar remains steady despite alarming events in NZ
The Pound Sterling versus New Zealand Dollar exchange rate pair remains very much within its 1-2 month range despite news of a couple of strong earthquakes in New Zealand which has resulted in people fleeing Wellington and some damage to buildings.
"On top of this, two managers have been fired as a result of Fonterra’s latest tainted milk scandal, which is adding to market uncertainty. Nonetheless, the NZD surprisingly remains unperturbed," says Richard Driver at CaxtonFX.
This pair is trading at 1.93 and more range-bound trading is expected as we head into the weekend.