Commodity currencies such as the Australian, New Zealand and Canadian dollars weakened against their major counterparts in the Asian session on Wednesday, as commodity prices weakened on worries about China’s economic slowdown.
Data from Caixin showed that the services sector in China continued to expand in December, albeit at a slower pace, with a PMI score of 50.2, marking the lowest reading in 17 months. That’s down from 51.2 in November.
The composite index came in with a score of 49.4 in December, down from 50.5 in the previous month while turning to contraction.
Also, the latest survey from the Australian Industry Group showed that the service sector in Australia continued to contract in December and at an accelerated pace, hitting a 13-month low. The PMI came in at 46.3, down from 48.2 in November.
Moreover, the NZ dollar remains under pressure after Fonterra dairy auction results showed another drop in the dairy prices during its first dairy auction of 2016. The GlobalDairyTrade Price Index (GDT) dipped 1.6 percent to an average selling price of $2,458 per metric ton.
The decline in milk prices increased expectations concerning a RBNZ interest rate cut.
Meanwhile, Asian stock markets traded lower amid worries about China’s economy after the country’s central bank fixed the yuan at a fresh five-year low against the U.S. dollar. Geopolitical tensions surrounding the developments in the Middle East and speculation about a nuclear test by North Korea also weighed on investor sentiment.
Tuesday, the Australian and the New Zealand dollars showed mixed trading against its major rivals. While the aussie and the kiwi fell against the U.S. dollar and the yen, they held steady against the euro.
Meanwhile, the Canadian dollar fell against the U.S. dollar and the yen, but rose against the euro.
In the Asian trading, the Australian dollar fell to more than a 3-month low of 84.18 against the yen, nearly a 3-week low of 0.7109 against the U.S. dollar and a 2-day low of 1.5148 against the euro, from yesterday’s closing quotes of 85.23, 0.7159 and 1.5005, respectively. If the aussie extends its downtrend, it is likely to find support around 83.00 against the yen, 0.70 against the greenback and 1.55 against the euro.
Against the Canadian dollar, the aussie edged down to 0.9967 from yesterday’s closing value of 1.0016. The aussie is likely to find support around the 0.98 area.
The NZ dollar fell to a 3-month low of 78.57 against the yen and a 3-week low of 1.6234 against the euro, from yesterday’s closing quotes of 79.81 and 1.6025, respectively. If the kiwi extends its downtrend, it is likely to find support around 77.00 against the yen and 1.65 against the euro.
Against the Australian and the U.S. dollars, the kiwi dropped to more than a 3-week low of 1.0729 and a 4-week low of 0.6633 from yesterday’s closing quotes of 1.0676 and 0.6703, respectively. The kiwi may test support near 1.09 against the aussie and 0.65 against the greenback.
The Canadian dollar fell to a 12-year low of 1.4039 against the U.S. dollar and a 3-year low of 84.34 against the yen, from yesterday’s closing quotes of 1.3996 and 85.06, respectively. If the loonie extends its downtrend, it is likely to find support around 1.43 against the greenback and 83.00 against the yen.
Against the euro, the loonie dropped to a 2-day low of 1.5095 from yesterday’s closing value of 1.5040. On the downside, 1.53 is seen as the next support level for the loonie.
Meanwhile, the safe-haven yen strengthened against its major rivals amid rising risk-aversion.
Data from Nikkei revealed that the services sector in Japan remained in expansion in December, with a PMI score of 51.5. That’s down marginally from 51.6 in November. The composite index came in with a score of 52.2 in December, down from 52.3 in the previous month.
The yen rose to nearly a 9-month high of 127.45 against the euro and more than a 1-year high of 173.61 against the pound, from yesterday’s closing quotes of 127.95 and 174.66, respectively. If the yen extends its uptrend, it is likely to find resistance around 126.00 against the euro and 172.00 against the pound.
Against the U.S. dollar and the Swiss franc, the yen advanced to nearly a 3-month high of 118.35 and nearly a 1-year high of 117.47 from yesterday’s closing quotes of 119.05 and 118.03, respectively. The yen is likely to find resistance around 117.00 against the greenback and 116.00 against the franc.
Looking ahead, final PMI reports from major European economies for December and Eurozone PPI for November are due to be released later in the day.
In the New York session, U.S. trade balance and factory orders data, both for November, U.S. private sector jobs data for December, Markit’s U.S. service sector PMI report for December, the Institute for Supply Management’s U.S. non-manufacturing PMI for December and U.S. crude oil inventories data are slated for release.
At 2:00 pm ET, U.S. Federal Reserve releases minutes from December 15-16 FOMC meeting.
The material has been provided by InstaForex Company – www.instaforex.com