The final week of the second half of the year started in a good mood signalling little chance for the bears to trigger a typical June correction on equity markets. All the major indices advanced in Asia on Monday, albeit at a limited scale. GBP and AUD outperformed in the G10 against this positive backdrop.

The Japanese Nikkei225 (JAP225 on xStation5 platform) advanced by 0.07% and the Australian S&P/ASX200 (AU200) rose by a tepid 0.1% but both Chinese indices showed a more decisive moves with Shanghai Comp up by 0.69% and Hans Seng CE (CHNComp) rising by 0.53% as of early European trade. There was not much news accompanying investors after the weekend so this benign trade helped bulls in what seems to be an attempt to carry another solid quarter until the close.

On the FX front, GBP and AUD saw modest gains, of 0.22% and 0.15% respectively, on different backgrounds, though. The GBP cemented recent gains as it seems like a Conservative-DUP coalition could be finalized today.  

Meanwhile the AUD seems to capitalize on improved risk sentiment although views on the currency start differing. Westpac analysts believe the currency begins looking expensive given a fundamental background of interest rates, commodity prices and macroeconomics. Their models suggest a “fair value” closer to 0.73. Meanwhile, the UBS remains modestly bullish. Bank’s economists believe the currency is not overvalued given current iron ore prices (this is the main exports commodity) although further declines would be dangerous. However, the Bank expects iron prices to recover modestly and that should support the AUDUSD exchange rate.

AUDUSD remains in an upward trend on a D1 interval as 0.7520 support has not been even tested. The pair could attempt to break 0.76 again. Source: xStation5