Australian dollar hones in on 0.70 US cents as risk on narrative continues
|AUD - Australian Dollar
The Australian Dollar continued its upward march through trade on Tuesday, extending Monday’s move and pushing toward 0.69 US cents. Investors continue to ignore the immediate slew of negative headlines and dire macroeconomic indicators, instead backing a swift rebound across the global economy through H2. The risk on narrative remains in full swing as equity markets remain well bid and central banks control price swings among the rates market. The AUD was again the top performer and has in fact enjoyed a stellar rebound since touching 0.5510 in mid-March. The Australian dollar has recouped all losses suffered in the wake of the coronavirus crash and looks set to outstrip major counterparts through June, eyeing a move toward 0.70 US cents. While there are still hazards that could force a shift in the current risk on storyline there is little in the way of technical resistance at the current levels. Having touched intraday highs at 0.6899 the AUD is poised to push through 0.6915/30 and extend toward the psychological 0.70 handle. With the RBA offering little in the may of resistance Tuesday, maintaining its current QE policy setting and giving little indication of a shift in interest rates our attentions turn to Q1 GDP data and US preliminary non-farm payroll numbers. Unless the aforementioned datasets completely miss the mark we would expect a largely muted reaction with the risk narrative controlling broader moves.
Key Movers
The US Dollar correction continued through trade on Tuesday outstripped only by the JPY as the worst performing currency among major counterparts. Having touched three month high just two weeks ago the USD dollar index has suffered a swift and sharp downturn, correcting 3% through the last fortnight with ample scope for further declines. The dollar has outperformed for an extended period and there has long been a suggestion a broader correction was needed; the question was around timing. If the current shift is the beginnings of a broader USD repositioning there is a real possibility of extended downside.
The Euro and GBP both enjoyed modest gains up three and four tenths of a percent as Brexit negotiations continue and Britain appears to be beginning to compromise in order to avoid a hard Brexit come the end of the year.
Attentions today turn to a slew of European services data as a key marker as to the scale of recovery since lockdown measures were enforced, while preliminary US non-farm payroll numbers dominate the US ticket. With the labour market in ruins, the coronavirus pandemic continuing to spread and social upheaval spreading across the country, hope the US will swiftly bounce back are beginning to dwindle.
Expected Ranges
AUD/USD: 0.6680 - 0.7020 ▲
AUD/EUR: 0.5980 - 0.6230 ▲
GBP/AUD: 1.7980 - 1.8450 ▼
AUD/NZD: 1.0750 - 1.0920 ▲
AUD/CAD: 0.9180 - 0.9380 ▲
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