Daily Analysis: 4 Apr 2019

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Fundamental Analysis

(4th Apr): Today’s mixed risk sentiment is keeping a lid on the commodity currency. In a light economic calendar week, the AUD could drop from its new high lacking new progress from the trade talk. After a significant rally on Wednesday, the market hesitates to take on more risky assets.


A surprise jump in Australia’s retail sales data does little to alter the view that household consumption is under pressure from falling home prices and subdues income growth. Although RBA rate cut expectations have pulled back in recent days, markets are still pricing a 25 bps reduction by September. We remain neutral on AUD for today’s trading as the risk appetite subdued.



(3rd Apr): The AUD led a risk-on rally on expectations for a U.S-China trade deal. China’s Manufacturing PMI jumped to a one-year high and Australia’s retail sales and trade balance beat estimates. These data releases should be enough to buoy AUD for one or two days.


On the fiscal policy side, Prime Minister Scott Morrison’s government forecasted Australia’s first surplus in more than a decade in a budget even with the pledge of sweeping tax cuts. The Treasury is projecting an A$7.1 billion surplus for the fiscal year through 2020 thanks to surging commodity prices and the strong labor market. However, most of the assumptions for the forecast jar with recent economic slowdown as household spendings remain fragile amid the worst property slump in a generation. Although the Liberal-National coalition represented by Scott Morrison has a reputation for a better economic management than the labor government, the polls are supporting a labor government this time.


While this confusion could cast some uncertainties on AUD, the currency is still likely to hold on at the monthly high level for a while. This echoes our technical analysis, showing limited upside where the AUD could consolidate the gains in today’s trading.



(2nd Apr): The AUD dropped on Tuesday after RBA kept the rate unchanged. Governor Lowe adjusted the key final paragraph for the first time since Feb, adding “ set monetary policy to support sustainable growth in the economy”, which can be seen as a more dovish stance than the previous statement. However, this comes with not much surprise as the market has priced in two interest rate cut from the last RBA meeting.


The focus today will be the annual budget plan to be released later. The budget to be announced late Tuesday will be the conservatives coalition’s final major act before going to voters in May with the argument that they are better economic managers than the center-left Labor Party opposition. Treasurer Josh Frydenberg said the budget for the fiscal year starting July 1 would achieve a surplus without increasing taxes. The government also plans to provide tax breaks for low and middle-income earners. This increased the optimism for sound economic growth in Australia and possibly less interest rate. Our bullish bias for AUD today echoes the technical analysis showing more upside from the new low it made.



(1st Apr): The commodity currencies AUD and NZD climbed after China’s upbeat PMI print. Aussie bond yield ticks higher, indicating slightly relieving concerns on its economic growth. Though recent industrial and export number look weak, the labor market still remains strong in Australia. Plus, Australia’s most important trading partner China is showing a rebound in the manufacturing sector. These together make a rate cut in the near term less likely. Plus, the iron-ore prices could rally due to recent lost production in Brazil. This bullish bias echoes our technical analysis showing more upside before the Aussi index reaches its first resistance.




Technical Analysis

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Fundamental Analysis

(4th Apr): The U.S. economy remains strong, but this week’s key numbers have been posting downside surprises. The weak durable goods orders data comes on the heels of soft retail sales numbers for March. Retail sales declined by 0.2%, shy of the estimate of +0.3%. Core retail sales declined by 0.4%, a sharp drop from the 0.9% gain a month earlier. Both indicators… [/blur][/vc_column_text][/vc_column][/vc_row][vc_row row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” text_align=”left” background_animation=”none” css_animation=””][vc_column][vc_empty_space height=”35px”][vc_row_inner row_type=”row” type=”full_width” use_row_as_full_screen_section_slide=”no” text_align=”left” css_animation=””][vc_column_inner width=”1/5″][/vc_column_inner][vc_column_inner width=”3/5″][vc_separator type=”normal” color=”#b70909″ border_style=””][/vc_column_inner][vc_column_inner width=”1/5″][/vc_column_inner][/vc_row_inner][vc_empty_space height=”35px”][/vc_column][/vc_row][vc_row row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” text_align=”left” background_animation=”none” css_animation=””][vc_column width=”1/5″][/vc_column][vc_column width=”3/5″][kswr_heading head_align=”center” head_subtitle_color=”#333333″ head_title=”ACCESS RESTRICTED” head_title_fsize=”font-size:23px;line-height:2;” head_title_fstyle=”font-family:Inherit;font-weight:700;” head_subtitle_fsize=”font-size:17px;line-height:1.5;” head_subtitle_fstyle=”font-family:Inherit;font-weight:inherit;” head_title_margins=”margin-top:0px;margin-bottom:0px;” head_subtitle_margins=”margin-top:0px;margin-bottom:0px;”]Our comprehensive daily reports covers both technical and fundamental analysis, and are customised to your requirements.

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