AUD range bound amid growing COVID19 concerns

AUD - Australian Dollar

The Australian dollar drifted sideways through out trade on Monday, bouncing between 0.6850 and 0.6890 amid a largely tepid start to the week. Moves across currency markets were muted despite a bounce in risk demand that saw equities recoup Friday’s sell off. The S&P 500 rallied over 1% Monday, unwinding Friday’s risk off move as investors continue to buy the dip on a broader hope the global recovery is still on track. Despite heightened whipsaw action across equity markets the AUD appears largely range bound, with traders reluctant to extend topside gains beyond 0.70 US cents while supports at 0.6840 and 0.68 are holding firm for now. Coronavirus infection rates in the US are rising at an alarming rate while Victoria struggles to control its own outbreak, while the global spread of the disease shows little signs of slowing. While there is still an overwhelming sense a global v-shaped recovery is possible, the recent resurgence in infections rates serves as a reminder that the promise of full-scale economic re-opening may still be some time off., forcing investors to check the recent risk on run.

Attentions today turn to Chinese PMI data and domestic weekly labour market indicators as markers of macroeconomic health. Risk remains the primary driver and as markets continue to grapple with the uncertainty that is COVID19 the threat of a broader risk off move remains a short-term concern.

Key Movers

Haven currencies were the days big losers as the JPY and CHF both retreated amid an equity led risk on move. While price action across currency markets was largely muted throughout trade on Monday the rebound in the S&P 500 did prompt a small risk on correction forcing the Yen and Franc near half a percent lower as the promise of sustained Federal Reserve support continues to prop up equity markets. Despite growing concerns the renewed COVID19 outbreak will derail the v-shaped recovery and disrupt the risk on mood there is a sense the Fed will simply step in and support financial markets by any means necessary, propping up equity prices and perhaps sustaining the current risk on move beyond its natural lifeline.

The Great British Pound Fell through trade on Monday as concerns regarding Brexit and Britain’s ability to fund planned fiscal infrastructure programs forced the below 1.23 to intraday lows at 1.2252.

Attentions today remain squarely affixed to the evolving fight against COVID19 as risk continues to drive direction and underlying fundamentals are largely ignored.

Expected Ranges

AUD/USD: 0.6810 - 0.6950 ▼

AUD/EUR: 0.5980 - 0.6150 ▼

GBP/AUD: 1.7780 1.8120 ▼

AUD/NZD: 1.0650 - 1.0720 ▲

AUD/CAD: 0.9320 - 0.9420 ▼