Aussie above 0.70 handle

Friday, Jan 22 2016

There were no data releases from Australia this morning. Uncertainty across financial markets has led to the safe haven demand for the yellow metal, pushing Aussie up. Oil prices and global equity markets rebounded, following a turbulent few days that wiped trillions of dollars off asset values, though it was unclear whether the vigorous selling action had come to an end. Physical gold demand in Asia slowed this week as prices rose, curbing seasonal buying in China ahead of a long holiday and forcing sellers in India to offer a discount.

However, China is still in focus. Cut in global growth forecast by the IMF will further act as a positive factor for the yellow metal. China’s economy and central bank have taken on global relevance but it still has antiquated monetary practices compared with developed economies’ central banks. Monetary policy decisions aren’t made independently by the central bank. Nor does it hold news conferences or release a schedule of meetings or minutes of those meetings or provide public testimony on policy, as the Fed and other central banks do.

China's crackdown on capital outflows may have one unexpected casualty: Australia's casinos. For the gambling operators, Beijing's move to tighten foreign currency transactions and put an end to the use of underground banks will probably deter the high-stakes players coveted by the industry. The new government measures combined with a campaign against corruption have already pushed lucrative VIP gamblers away from Macau, the only Chinese jurisdiction where gambling is legal.

Aussie is currently being traded around 0.7020 area. Pair is likely to find support around 0.6930 handle and resistance above 0.7070 level. Later today, in the US session, Existing Home Sales figures are scheduled for a release.

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