By Kymberly Martin
The USD was on a steady uptrend on Friday and into the weekend close. Most of its peers were weaker, with the exception of a stronger AUD and CAD.
The USD index had positive momentum through the day on Friday, before consolidating its gain in the late evening. It then gained an additional boost early on Saturday morning, as US bond yields rose, following comments from Fed Chair Yellen.The USD index ended the week close to its week’s high, which was its highest level since mid-March.
In this backdrop European currencies were mostly under pressure. The EUR/USD traded down from 1.1020 to close for the week at 1.0970. This is its lowest level since late-July.
Meanwhile the GBP/USD also traded lower. It ended the week at 1.2190. From a charting perspective, it looks as if the 1.2800-1.3500 range that sustained for the first three months after the ‘Brexit’ vote, might be in the process of being replaced with a broad 1.1800-1.2500 range. Our forecasts see the GBP/USD trading in the low 1.20s as we move into next year with further downside later in 2017.
The ‘commodity-linked’ CAD and AUD were both stronger on Friday, although there was no obvious strength in underlying commodity prices. Broad commodity indices and oil prices were fairly flat on the day. There was no additional news from the Istanbul energy conference regarding the latest positions of Russia and Saudi Arabia on a potential production cut agreement next month.
The AUD/USD closed at 0.7620, a little off its intra-night highs. Our NAB colleagues believe the AUD’s resilience in the face of broad-based, albeit modest, USD strength might present at least a short term selling opportunity above 0.76.
As the NZD/USD was reasonably range-bound on Friday evening the NZD/AUD traded lower. It gapped through technical support at the 200-day moving average of 0.9330. It then traded below 0.9300, before closing for the week just below the former level.
Locally, it is a relatively quiet start to the week with only the NZ PSI scheduled on the data calendar today.
Tomorrow will potentially be a more exciting day for the cross. NZ Q3 CPI is due (see Interest Rates), the RBA’s Minutes are due and RBA Governor Lowe is scheduled to speak at a conference in Sydney.
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