Australian Markets Weekly: 11 December 2017

Two weeks ago, we wrote on the outlook for the AUD from our Head of FX Strategy, Ray Attrill highlighting the expected move of the AUD/USD into the US$0.70-0.75 cent range.

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AUD and NZD “Technically speaking”

  • This week, we draw to your attention a report we have released today from our Technical Analyst David Coloretti on the AUD/USD and the NZD/USD, complementing the research from our FX Strategy team. Sophisticated investors are able to be added to the distribution list for this product.
  • In David’s view, the AUD/USD has achieved its medium term (MT) downside target somewhat ahead of time. This target is the two-year uptrend line currently at 0.7475/0.7500. The decline of the past three months is approximately 7.5%.
  • Given the magnitude of this decline, he is wary of a pause in the downtrend, despite momentum indicators reminding us that the downtrend is most impulsive. This week we will watch price action closely. It will not be until the end of the week that we can truly ascertain the response to this trend line support and formulate targets for the coming weeks/months.
  • Locally this week, tomorrow’s NAB Survey and Thursday’s employment reports are the two most obviously market-sensitive economic reports. RBA Governor Lowe is speaking on Wednesday, an event always to be closely watched. However, his speech, “An eAUD” at a payments summit looks like it may well be much less on the economy and interest rates markets and more on the technological future of the AUD. However, there is always the potential for comments in the Q&A if not in the speech.
  • For Thursday’s employment report for November, we look for a solid 15K rise in employment and a steady unemployment at 5.4%. Consumer Confidence will also be in focus. The Budget MYEFO is due “soon” (before Christmas) and set to unveil some incremental lowering of this year’s forecast deficit thanks to higher levels of employment and stronger mining profits.
  • Offshore, central banks remain in focus, especially this week’s Federal Reserve meeting. While the Fed is widely expected to increase rates (a rise that’s fully priced in), the market will be paying close attention to the dot plots of the Fed funds forecasts for 2018 and beyond. While there may well be some changes, we expect these to be more at the margin, further gradual interest rate rises remaining in prospect. The Fed decision, forecasts and a press conference from Chair Yellen – likely her last – come early Thursday morning.
  • China releases its November economic activity reports on Thursday, likely still solid

For full analysis, download the report:

For further FX, Interest rate and Commodities information visit nab.com.au/nabfinancialmarkets