AUD/USD is firmly higher this morning, reaching the 0.710 area following strong trade balance data and an upbeat retail sales reading.

Retail sales surged to 0.8%, smashing the forecast of 0.2% and registering its highest reading in more than 14 months. A strong uptick in both trades and consumption suggest wage growth is poised to tick up higher and the RBA will have more reason to hold back rate cuts. The latest China manufacturing data has also shown early signs of economic recovery, which is backing AUD’s strength.

The four-hour chart suggests its short-term trend has shown signs of being oversold, with immediate support at the 0.705 area. Momentum indicators RSI and DMI have entered into an oversold zone, and a technical rebound is likely to sustain if the 0.705 level holds.

NZD/USD has likely found some support at around the 0.675 area, which is also a 61.8% Fibonacci extension level on its four-hour chart. The overall trend, however, remains bearish as RBNZ’s hint about a potential rate cut last week opened room for more downside for the kiwi dollar in the mid- to long-term.

US equities closed mixed overnight, with the Dow Jones being dragged by Walgreens’s profit warning while the Nasdaq moved higher thanks to a strong rally in Facebook. US durable goods fell by les than markets had forecasted earlier, falling 1.6% compared to a 1.8% consensus. The WTO’s warning of a global economic slowdown as a result of the US and China trade conflict unnerved markets as ongoing trade negotiations seem to have stalled.

As US markets continued its recovery rally and moved closer to historical highs, we should be more aware of the complacencysentiment – which is usually not a good sign for stock markets. Given the fact that US corporate earnings growth could slow down in the first quarter, as broad economic indicators have suggested, the upside from now looks relatively tight compared to the downside.

Risk sentiment turned a bit sour today, with treasuries rallying and risk assets moving lower at Asian opening. Fear of lower interest rates and an aversion to take excess risk were probably the main drivers behind treasury’s strength.

A potential new round of Iranian sanctions and interruption in Venezuela’s production site drove Brent oil prices higher above the US$70 mark, and dollar’s retracement lifted the broad commodity market. Technically, US$72.5 remained a key resistance level (61.8% Fibonacci retracement) for Brent.

AUD/USD chart

 

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.