The Australian dollar has had a tough couple of weeks.
Yesterday, against the U.S. dollar the Aussie finished the FX session down for the third consecutive day (its eighth daily fall in the past ten trading days). As of writing, AUD/USD is down again in Tuesday’s Asian session, trading at 0.7591, marking a 2% fall from highs posted on March-21.
No major moves are likely in AUD pairs this morning, however. Not with the RBA interest rate decision at 04:30 GMT (14:30 in Sydney). No change in the cash rate is expected at today’s meeting.
One thing does appear certain though, and that is the presence of massive resistance in the AUD/USD rate between 0.7750 and 0.7835. The pair has not traded above 0.7835 since the middle of 2015. Within the last few weeks, Australian dollar bulls have, for the umpteenth time, failed to break through these levels.
Time to Take Advantage of Australian Dollar Valuations
With increased volatility expected this quarter compared with the last (yesterday was the first trading day of Q2) and with fairly dismal Australian retail sales figures yesterday (-0.1% m/m vs. +0.4% previously), it does not seem unreasonable at this point to say that Australians looking to travel, send money or make purchases overseas (especially in the U.S.) should consider doing so sooner rather than later. There are only so many knocks on the door one can make before eventually you realise that you’re not welcome. And in the case of the Australian dollar, if indeed it isn’t welcomed in Q2, then it has a long way to fall against its peers. Readers can beat their banks by using BestExchangeRates’ online calculators to compare providers of travel cash and foreign currency transfers.
A U.S. Dollar Waiting Game and One-Way Traffic in the Rand
In other FX news, markets were surprised yesterday when ratings agency Standard & Poor’s downgraded South Africa’s sovereign credit rating to “junk” status (to BB+ from BBB-). The ratings agency said it was their opinion that “the executive changes initiated by President Zuma have put at risk fiscal and growth outcomes”.
The South African Rand continued to get hammered on the news, falling by more than 3% yesterday. The Rand now buys only USD 0.0728 (USD/ZAR 13.73) and has fallen 11% against the U.S. Dollar since a stunning reversal began back on March-27.
South Africa appears to be in the middle of a political crisis. On Thursday, South African president and leader of the ANC party, Jacob Zuma, sacked his well-respected finance minister, Pravin Gordhan, as part of an overnight cabinet purge. Markets have been unimpressed with the appointment of Malusi Gigaba as the new finance minister – a man without any significant business or financial experience.
In what was an absolute snoozefest of a session in EUR/USD yesterday, the pair managed to produce a high-low range of only 39 pips. EUR/USD traders are sitting on their hands as they wait for Wednesday’s ADP employment change, Friday’s U.S. payrolls data and comments from ECB’s Draghi later today and again on Thursday.
On the political calendar, U.S. President Donald Trump meets with Chinese Premier Xi Jinping on Thursday and trade is expected to be at the forefront of their discussions. The dynamic between the two leaders will be interesting, given that Trump has frequently accused China of undervaluing its currency at the expense of the American economy. In January, Trump suggested that the level of the U.S. dollar versus the Chinese Yuan was “killing us” and in February called for a “level playing field” on currencies during his meeting with Japanese prime minister Shinzo Abe.