The AUD/USD pair kept falling during the US session on the back of a stronger US dollar that gained ground amid risk aversion. The Aussie pulled back initially to the level it had before the upbeat Australian jobs report and kept sliding. It recently bottomed at 0.7088, below the level it had before the Fed’s meeting.
Earlier, AUD/USD rose to 0.7167, the highest level in three weeks. Since then lost more than 70 pips making a reversal that leaves the cross vulnerable. As of writing it is trading slightly above 0.7100. The decline from the top found support at the 20-day moving average. A close clearly below that level would point to more losses for the Aussie in the short-term.
Better-than-expected US data contributed to the rally of the greenback. Also, the uncertainty around Brexit favored the demand for the greenback. The DXY rebounded sharply from monthly lows and rose to 96.62, the highest intraday level since March 15.
No key reports are due in Australia on Friday while in the US the flash PMIs and housing data will be released. Brexit development could impact on market sentiment as the EU summit goes on.
Citing a person familiar with discussions, Bloomberg recently reported that the EU was considering “persuading the U.K. to extend Brexit by nine months” if Prime Minister Theresa May’s Brexit deal fails to pass through the British Parliament for the third time next week.
“The EU doesn’t want to be blamed for a no-deal Brexit so leaders would try to convince May to accept the plan. She and the 27 other leaders would have to be on board,” Bloomberg wrote.
The price of oil has been in a consolidation around the 60 handle for the best part of this week as traders look to OPEC and signs of a trade despite breakthrough between China and the US.
“The DOE reported a massive inventory draw in crude oil, gasoline and distillates, in yet another signal that prices should remain supported by a constructive supply-side narrative,” analysts at TD Securities explained.
Meanwhile, “Chair Powell emphasized that the Fed’s “watchful waiting” justified no bias for the next policy move. We were expecting his risk management message but we were not expecting as many Fed officials would associate that with no hikes this year. We revise our Fed forecast for no more rate hikes this year,” analysts at TD Securities wrote.
The technical outlook remains the same; While the price holds above the double-top highs and above the 57.93 horizontal prior resistance line going back to mid-Nov 2018, the market remains bullish. At this juncture, the price is supported at trendline support prior resistance of 59. Bulls look to the 61.8% Fibo of the Oct 2018 sell-off to late Dec lows at 63.74, reviving prospects for the 70 handle. On the flipside, on the wide, a fall to 54.50 will open a case for 50.50 as the 23.6% Fibo support structure.
USD/CAD daily chart
USD/CAD 4-hour chart
USD/CAD 30-minute chart
Additional key levels
For a number of mixed reasons, the greenback is taking up the bid. Despite the accommodative stance by the Fed and yesterday’s dovish shift in rate hike expectations, gold is under pressure.
“While the US central bank killed the dream of an additional rate hike in 2019, signalling a “perma-pause”, the reality is the market believes that the next move may very well be a cut. CTAs are set to turn become substantial buyers above $1315/oz, and given that the economy may be slowing, we remain comfortable with our eventual $1,400+ target for the yellow metal, as we expect data to continue deteriorating,” analysts at TD Securities explained.
The precious metal previously picked up a bid earlier when President Trump said he would keep tariffs on China even after a trade agreement had been reached to make sure the country is adhering to the terms of any trade deal.
To the downside, 1302 is key ahead of 1298, 1290 while 1280 is a keen target. Below there, 1275 remains the line in the sand to the downside, and a break below it will put the attention back to the towards to 1250, a key confluence area made up of Fibos and prior support and resistance. On the next leg up,however, 1332 guards the 2019 highs as being the 19th Feb high of 1345.19.
GBP/USD daily chart
GBP/USD 4-hour chart
GBP/USD 30-minute chart
Additional key levels
AUD/USD daily chart
AUD/USD 4-hour chart
AUD/USD 30-minute chart
Additional key levels
According to draft conclusions making the rounds, the European Council commits to agreeing to an extension until 22 May 2019. Given that the UK does not intend to hold elections to the EP, no extension is possible beyond that date.
The conclusions will also ‘approve the instrument relating to the WA and the joint statement supplementing the PD agreed between the European Commission and the UK in Strasbourg on 11 March 2019.’
GBP/USD little affected by the headline, already near 1.3000 and over 150 pips down for the day ahead of it.
Commenting on the Bank of England monetary policy statement, Nordea Markets analyst Morten Lund noted that the bank kept its policy rate on hold as expected while waiting for Brexit developments and argued that a rate hike in August could be possible if the EU were to grant a long Article 50 extension to the UK.
“The BoE’s hands are currently tied as the bank awaits further news on Brexit. If either Theresa May manages to pass her deal before March 29 or if the UK and EU agree to a long deadline extension, we think it is plausible that the BoE will hike in August. Thus, both outcomes should decrease uncertainty somewhat in the short-run and make room for a hike, as the “wage hawks” in the MPC probably have been wanting for a while.”
“In case of a short extension to June 30 – as Theresa May has officially asked the EU for – the risk is clearly tilted towards a rate hike in November instead of August. Hence, the MPC will most likely need to see some months of data points with evidence that growth is bouncing back, before making a hawkish move.”
The GBP/USD pair broke previous lows and tumbled to 1.3063, reaching the lowest level since March 13. From the lows bounced to the upside and as of writing was hovering around 1.3085, slightly above the lows but still under pressure.
The move lower took place amid a decline fo the pound across the bard and also on the back of a stronger US dollar. The DXY printed a fresh daily high at 96.50, erasing yesterday’s losses that followed the Fed’s meeting.
Regarding the pound, UK political uncertainty and Brexit latest events weigh significantly. It is among the worst performers of the day. Reports indicate that leaders at the EU summit are asking UK PM May to get her deal approved in the Parliament before granting an extension to Article 50. Also, the date of the extension is being debated actively.
Earlier today, the Bank of England, as expected, kept its monetary policy unchanged, on an event mostly ignored by markets, offset by Brexit developments. “The BoE’s hands are currently tied as the bank awaits further news on Brexit. If either Theresa May manages to pass her deal before March 29 or if the UK and EU agree to a long deadline extension, we think it is plausible that the BoE will hike in August. Thus, both outcomes should decrease uncertainty somewhat in the short-run and make room for a hike, as the “wage hawks” in the MPC probably have been wanting for a while”, wrote Morten Lund, Research Analyst at Nordea Markets.