AUD/USD surges through 0.74 on heels of risk on rally

AUD - Australian Dollar

The Australian dollar extended gains through trade on Thursday, punching through 0.74 US cents. Having again tracked sideways through the domestic session, bouncing between 0.7370 and 0.7390, the AUD surged toward intraday highs overnight. Buoyed by a solid risk on run, the AUD touched 0.7425, before leveling out into this morning’s open. There appears no real catalyst for the shift in risk demand as investors backed US stocks, snapping a four-day losing streak. The S&P 500 enjoyed its biggest single day appreciation in 7 months, dragging other risk assets including commodity currencies higher. The Aussie dollar has enjoyed renewed support this week on the back of stronger commodity prices, a fall in US yields and renewed optimism the re-opening of the domestic economy will foster a swift and rapid economic rebound. Having moved above its 100 day moving average, the door is open for the AUD to extend gains into the weekly close. A consolidated break above 0.7413 and a push above 0.7425 suggest there is sustained buying demand, while a correction and shift lower could see a dip back toward 0.7385. With little of note on today’s domestic ticket our attentions remain offshore. Reports the Peoples Bank of China will cut its RRR rate today could prompt price action through the domestic Australasian session, while US retail sales dominate the overnight docket.

Key Movers

There was plenty of price action across major currencies through trade on Thursday, as investors chased stocks higher in a broader risk on run that extended across commodity currencies. A marginal downturn in US PPI data and a correction in US yields saw the USD give up ground across the board early, with the euro punching back through 1.16 and sterling testing a break above 1.37. Neither currency was able to hold onto gains as uncertainty surrounding central bank action prompted a broader sell off. The recovery against the euro and GBP, and an extension against the yen saw the US dollar index drift only marginally lower on the day, down just 0.1% despite strong gains across the CAD, NZD and AUD. The Japanese yen was by far the worst performer as the USD marked new highs touching 113.70, prompting even bigger moves against key crosses with the NZD surging toward 80 and the AUD consolidating a break above 84.00. Our attentions remain with the broader risk narrative and any signal markets may look to extend the rally into the weekly close.

Expected Ranges

AUD/USD: 0.7330 - 0.7450 ▲

AUD/EUR: 0.6340 0.6420 ▲

GBP/AUD: 1.8330 - 1.8530 ▼

AUD/NZD: 1.0490 - 1.0610 ▼

AUD/CAD: 0.9130 - 0.9190 ▼