Aussie continues rise on global recovery hopes

OFX Daily Market News

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AUD – Australian Dollar

The Australian dollar jumped to multi week highs on Wednesday as risk appetite continued to improve. AUD/USD continued its weekly ascent to touch highs of 0.6616 on investors hopes that the global economy may be starting to show signs of recovery. The strong moves represent the first time the pair has traded above 0.6570 since early March.

As we have been saying for months, the Australian dollar has continued to trade in line with global risk sentiment and by association has been highly correlated with global equities. This saw traders ignoring Wednesday’s record fall in monthly retail sales with the AUD benefiting from a subdued greenback and a solid pickup in the S&P500. A continuation of heightening risk appetite will continue to weigh on safe haven currencies such as the USD and JPY and should underpin demand for risk currencies such as AUD and NZD.

Looking ahead to todays session, we will hear from RBA governor Lowe and Deputy governor Debelle during Australian trade before a raft of secondary data due out of the USA. Heading into the session we see downside supports for AUD/USD around the 0.6500 level before the may 15 low of 0.6400. On the topside, sustained trading above key psychological resistance of 0.6600 is needed to open up moves to March 9 highs of 0.6665.

Key Movers

As we touched on above, safe haven currencies remained under selling pressure overnight as global equity indices rose on improved risk appetite. The greenback fell across the board, losing 0.6% against the EUR, 0.9% against the Australian Dollar and 1.2% against the Kiwi. There was a distinct lack of COVID 19 related news to guide market direction, with the US Federal reserve minutes garnering the most attention from traders.

The minutes from US policymakers touched on more explicit guidance and agreed that cash rates should stay low for a longer period. Most notably, there was no commentary regarding negative rates.

The Sterling was among the worst performers on the day, GBP/USD falling 0.2% to around 1.2220 as UK inflation data fell to its lowest level in three years. The Pound was subsequently under pressure as speculation mounted that the Bank of England could consider negative rates as well as a deeper stimulus response.

Expected Ranges

AUD/USD: 0.6402 – 0.6620 ▲

AUD/EUR: 0.5966 – 0.6065 ▲

GBP/AUD: 1.8512 – 1.8670 ▼

AUD/NZD: 1.0710 – 1.0760 ▼

AUD/CAD: 0.9105 – 0.9210 ▲


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