Possible Rate Cut for Aussie This Week & Ongoing Trade Tension Continue to Limit the Upside Potential for the Commodity Currencies

CURRENCY: AUD

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  • RBA rate decision tomorrow - potential downside risk due to highly possible rate cut
  • Ongoing trade tensions - potential downside risk due to being China’s proxy

FUNDAMENTAL ANALYSIS ON AUD

China's Caixin PMI came in at 50.2 vs 50 expected, signalling a further slight improvement in overall operating conditions in May, thus lifting the AUD this morning.

On a trade war front, President Trump downplays the likelihood of the US imposing tariffs on goods from Australia. Speaking to reporters, "The Australian situation is interesting but the relationship is very strong. No, we're doing a very special relationship with Australia". It was reported earlier that the Trump administration faced opposition from military officials and the State Dept after it considered imposing tariffs on goods from Australia last week. This has also helped ease trade worries and lift the AUD.

The week ahead remains an important week for the AUD with the RBA releasing their interest rate decision tomorrow. It is widely anticipated that there will be a 25bps cut. However, the main focus will remain on whether the RBA signals more rate cuts throughout the year. Based on historical moves, the RBA usually cuts rates twice if it decides to start easing. Moreover, the RBA has recently slashed its growth output from 2.5% to 1.75% for this year. We believe the AUD could weaken tomorrow.


KEY TECHNICAL LEVELS ON AUDUSD

AUDUSD has made a cup and handle breakout along with an Ichimoku cloud breakout, seeing the first support at 0.6934. This corresponds with the RSI bullish breakout above 47%. The next resistance is at 0.6990.

PRICE JOURNEY ON AUDUSD

Source: PsyQuation; AUDUSD Price Journey (03-06-2019)
Source: PsyQuation; AUDUSD Price Journey (03-06-2019)

Based on PsyQuation, AUDUSD started off the day losing slightly before rocketing up to gains of almost 0.34%.

What does this mean?

Such price journey movements where a price start off the first few hours of the day on par before shooting up strongly is commonly seen as a strong overpowering of bulls over bears. The bears put up a small fight at the beginning of the day before finally being overpowered.

Did you know monitoring the price journey movements of a currency pair can provide useful insights into its direction for the day? Wish to accurately monitor the price journey of each currency? Head over to the PsyQuation website to find out more.

Trade AUDUSD with 1.2 average spread. Open an account here.

 

CURRENCY: NZD

Data Preview

  • Ongoing trade tensions - potential downside risk as risk aversion will affect the NZD
  • Australia’s RBA rate decision - a rate cut could drag the NZD down as well

FUNDAMENTAL ANALYSIS ON NZD

New Zealand's budget last week confirmed that fiscal policy is offering no material support that would lift growth back above potential, so it is unclear how the RBNZ's growth targets will be hit by meaningful easing. Therefore JP Morgan anticipates two more interest rate cuts to a fresh record low of 1% as a mean of monetary easing to boost the economy. This week we see a quiet data week for the NZD, starting off with a holiday today. However, the NZD remains vulnerable to trade tensions and a possible weakening of the AUD tomorrow could drag down the NZD.

KEY TECHNICAL LEVELS ON NZDUSD

NZDUSD has started to pose a small recovery, recently making a bullish breakout above the Ichimoku cloud and descending resistance-turned-support line. The 1st support is at 0.6524 with the next key resistance at 0.6554.

 

PRICE JOURNEY ON NZDUSD

Source: PsyQuation; NZDUSD Price Journey (03-06-2019)
Source: PsyQuation; NZDUSD Price Journey (03-06-2019)

Based on PsyQuation, NZDUSD started the day strong, rising to gains of almost 0.3%.

What does this mean?

Such price journey movements where a currency rockets right off the open of the day is commonly seen in overwhelmingly bullish markets where the bears couldn’t put up much of a fight and were overpowered right at the get go.

Did you know monitoring the price journey movements of a currency pair can provide useful insights into its direction for the day? Wish to accurately monitor the price journey of each currency? Head over to the PsyQuation website to find out more.

Trade NZDUSD through AxiTrader. Open an account here.

 

The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

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