The Australian dollar's losing streak is over

16 Sep 2000: (L to R) Ashley Callus, Chris Fydler, Michael Klim and Ian Thorpe of Australia celebrate after winning Gold in the Mens 4 x 100m Freestyle Relay at the Sydney International Aquatic Centre during Day One of the Sydney 2000 Olympic Games in Sydney, Australia. They won the Gold in a World Record time of 3 mins 13.67 secs. Mandatory Credit: Al Bello /Allsport
  • The AUD/USD’s longest losing streak in two years came to an end on Friday, helped by late selling in the greenback.
  • Stronger-than-expected US economic data was not enough to see the US dollar index break above key technical resistance.
  • Chinese and Japanese markets will be closed on Monday.

The Australian dollar’s longest losing streak in two years came to an end on Friday, helped by a late bout of US dollar weakness.

The 5-minute AUD/USD chart below tells the story of Friday’s session with the Aussie slowly recovering after falling to fresh multi-month low in Asian trade.

AUD/USD 5-Minute Chart

The weakness in the greenback came despite stronger-than-expected US economic data released during the session.

The US Q1 GDP grew by 2.3% on a seasonally adjusted annual rate basis, topping expectations for a smaller increase of 2.0%.

Separate data on US wages also beat with the Employment Cost Index (ECI) lifting by 0.8% in the March quarter, up from 0.6% in Q4 2017 and above the 0.7% level expected.

As Ray Attrill, Head of FX Strategy at the National Australia Bank explains, after initially rallying upon the two reports, the US dollar index reversed those gains and more in the latter parts of trade.

“In FX, it turned out to be a day of two halves with the USD up across the board though early morning New York trade… [before] then giving it all back,” he said.

“The USD firmly rejected a test of the important 92.0 level on the narrow DXY index and US 10-year Treasuries recoiled from the mid-week achievement of a move onto a 3% handle to close at 2.96%.”

Attrill said the detail of the US GDP report was less impressive than the headline figure would suggest with private consumption rising by only 1.1% despite a boost to incomes from January’s income tax cuts.

The technical-related selling in the US dollar helped to lift all major currencies except the British pound which was weighed down by an ugly downside miss in its Q1 GDP report.

“The GBP story was all about GDP — the pound dropping by 1% after Q1 UK GDP printed just 0.1% to see odds on a May 10th Band of England rate rise slashed to less than 25% from around 605,” said Attrill.

“The jury will remain out for a while in determining the extent to which this was just a weather-related hit to growth or something a bit more pernicious. Either way, it has almost certainly taken a UK rate rise next week off the table.”

Turing to the day ahead, it looks set to be a quiet one with many markets likely to be quiet ahead of Labour Day holidays in the US on Tuesday.

On the data front, Australian private sector credit figures for March will be released at 11.30am AEST. The Melbourne Institutes monthly Australian inflation gauge will also arrive at 11am AEST.

On the regional front, China will release manufacturing and non-manufacturing PMI reports for April at 11am AEST.

Japanese and Chinese markets will be closed during Monday’s trading session.

Later in the day, data highlights German and Italian CPI, Eurozone monetary growth along with PCE inflation, consumption and income data from the United States.

Here’s the Aussie dollar scoreboard as at 7.50am AEST.

AUD/USD 0.7576 , -0.0005 , -0.07%
AUD/JPY 82.64 , 0.11 , 0.13%
AUD/CNH 4.7865 , 0.0029 , 0.06%
AUD/EUR 0.6246 , 0 , 0.00%
AUD/GBP 0.5499 , 0.0006 , 0.11%
AUD/NZD 1.0695 , 0.0012 , 0.11%
AUD/CAD 0.9724 , -0.0004 , -0.04%

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