AUD tests 0.60 as risk sentiment improves

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar creeped higher through trade on Tuesday, pushing through 0.59 to touch 0.5975 as improvements in demand for risk prompted gains against the USD and key haven crosses. Equities led the recovery Tuesday bouncing almost 8%, emboldened by unprecedented monetary policy measures enacted by the Federal Reserve and the ongoing promise of fiscal stimulus. A semblance of calm (when compared with the activities of the last fortnight) appears to enveloped markets as investors take confidence in the measures implemented to cushion the health and economic impact of the coronavirus by governments and central banks around the world. Encouragingly the drastic lockdown measures across Europe appear to be working as the pace of spread slowed through Monday and Tuesday and attentions now turn to the US as the next epicenter of the crisis. The WHO has criticized US officials for being to slow in enacting containment measures as the virus spreads through New York City at an alarmingly rapid pace with more cases per million citizens than Hubei Province.

Risk sentiment continues to drive direction and as more and more countries employ the measures necessary to contain the virus there is ample scope for another risk off move as the growth outlook across the domestic and global economy is constrained. While we see room for short-term AUD upside as investors unwind the US liquidity push and recent overshoot, we remain conscious the dollar is vulnerable to the heightened volatility and swings in sentiment. Watch resistance on moves approaching 0.60 with supports at last weeks low of 0.5510 intact for now.

Key Movers

The US dollar fell against the majority of major counterparty through trade on Tuesday as investors responded to the unprecedented stimulus measures enacted by the Federal reserve on Monday. Emboldened markets drove equities higher and began unwinding last week’s panic led liquidity push forcing the worlds base currency index lower for the first time in the last 11 days. With the pace of spread across Europe slowing this week the US, in particular New York city, has emerged as the new epicentre in the ongoing battle against COVID19. The US has been criticized as being to slow to react to the threat of the coronavirus and modelling suggest the health impact within the States could outstrip hotspots in Italy, Spain and even China.

The Great British Pound was the days big mover, bouncing back against the USD and testing moves through 1.18. Having touched 35 year lows last week, sterling found support in renewed demand for risk and a broader softening in the USD. The GBP remains vulnerable to broader risk sentiment swings with is ballooning current account deficit making it particularly vulnerable to risk off moves.

Attentions remains squarely affixed to the COVID19 pandemic and while we anticipate most currency will recoup much of the losses suffered against the USD in time, the world’s base currency will continue to find support as long as the pandemic continues and the pace of spread across the globe remains largely unchecked.

Expected Ranges

AUD/USD: 0.5510 0.6080 ▲

AUD/EUR: 0.5070 – 0.5620 ▲

GBP/AUD: 1.9520 – 2.0180 ▲

AUD/NZD: 1.0080 – 1.0280 ▼

AUD/CAD: 0.8240 – 0.8720 ▲


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