AUD/USD breaks 0.75 as risk appetite resurgent

AUD - Australian Dollar

The Australian dollar extended through 0.75 US cents on Thursday spurred on by improved risk sentiment and a broadly softer US dollar. Having broken resistance and the September high at 0.7478 on Tuesday, the AUD tracked sideways for much of the domestic session before extending gains overnight to touch intraday highs at 0.7525. A broader assessment of market conditions shows aversion to risk has fallen through October as investors set aside concerns that so plagued direction in September. With risk indicators falling and the AUD rising it is fair to say the recent rally could be extended should risk appetite continue to improve.

Our attentions remain squarely affixed to the current risk narrative. We are conscious the risks posed by stagflation, withdrawal of central bank monetary support, global energy concerns, supply chain bottlenecks and a downturn in Chinese growth prospects remain real and could prompt a correction in risk demand and the current upturn. For now, we are eyeing resistance at 0.7530 and 0.7590 as key barriers moving forward.

Key Movers

The US dollar was the worst performing major currency on Wednesday, driven lower by a resurgence in demand for risk and a correction in expectations for Fed monetary policy. The DXY dollar index gave up another 0.3% on the day as investors extended gains across the CAD, AUD and NZD while supporting the EUR and pushing the GBP back through 1.38. UK CPI inflation data remained well above the Bank of England’s target, although did fall short of market expectations, perhaps easing some of the pressure on the MPC to raise rates. That said with the BoE expecting inflation to push above 4% by year-end a rate hike in November is all but priced in. The JPY and CHF followed the USD lower as the broader move away from safe havens soured demand.

With little of note on today's macroeconomic calendar our attentions remain with the broader risk narrative.

Expected Ranges

AUD/USD: 0.7420 - 0.7560 ▲

AUD/EUR: 0.6370 - 0.6490 ▲

GBP/AUD: 1.8220 - 1.8520 ▼

AUD/NZD: 10390 - 1.0470 ▼

AUD/CAD: 0.9190 - 0.9320 ▲