AUD - Australian Dollar

Risk sentiment improved overnight, and unlike previous sessions which only saw equity markets rise, commodity prices and risk currencies were also buoyed. The strong start to the US earnings session overnight is seen as the catalyst for the improvement in risk sentiment, with the majority of companies beating market expectations so far.

With yesterday’s softer than expected retail sales numbers, AUD/USD initially touched an eight-month low of 0.7290 before improving to trade around 0.7360. Similarly, the NZD touched 0.6894 before recovering to 0.6977 forcing the AUD/NZD cross lower from 1.0580 to 1.0545.

The economic calendar remains light today with the only major event being the ECB meeting tonight. We are not anticipating any changes to policy setting but a robust discussion on inflation targeting is to be expected. AUD/USD traders will be looking to see if the current reversal in risk can carry the pair to 0.7400 today. On the downside, support can still be seen at 0.7300 and 0.7290.

Key Movers

Given the reversal in risk overnight, it was unsurprising to see safe-haven currencies sell-off and commodity-linked currencies benefit. With oil prices rising about 4% overnight, the Canadian dollar, which is highly correlated with oil prices due to the Canadian economy’s reliance on oil exports, was able to rise 1.2% against the USD. USD/CAD fell from 1.2700 to 1.2526 throughout trade.

Safe-haven currencies felt the brunt of the selloff as the USD index was down 0.2%, USD/JPY rose above 110 again and the EUR shook off four-month lows of 1.1750.

Expected Ranges

AUD/USD: 0.7290 - 0.7400 ▲

AUD/EUR: 0.6190 - 0.6260 ▲

GBP/AUD: 1.8560– 1.8690 ▲

AUD/NZD: 1.0500 - 1.0600 ▼

AUD/CAD: 0.9150 - 0.9280 ▼

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