AUD/USD trades below 71 US cents

Daily currency update

The Australian dollar is slightly weaker this morning when valued against the Greenback trading at 0.7085 at the time of writing. The AUD/USD pair is seen in a narrow trading band on Friday consolidating its recent strong gains to the highest level since June 2022 with a 2% gain, supported by the stronger CPI print mid-week driving higher Australia-global rate spreads. Further upside could lift AUD/USD to the 0.7170 zone in the short-term horizon. Should the Aussie dollar break above January 26 high at 0.7142, we could see a breakout that will drive the major toward the round-level resistance of 0.7200. A breach of the latter will expose the asset for more upside toward June 3 high at 0.7283. Looking ahead this week and on Tuesday we will see the release of monthly Retail Sales figures. This is the earliest look at vital consumer spending data and the primary gauge of consumer spending, which accounts for the majority of overall economic activity. On Wednesday we will see the release of the AIG Manufacturing Index a survey of about 200 manufacturers that asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. On Thursday all eyes will be on the Australian Bureau of Statistics’ monthly Building Approvals and the National Australia Bank (NAB) Quarterly Business Confidence survey.

Key movers

On Friday in the United States Core PCE Price Index came out at 0.3% MoM, slightly above 0.2% estimates and 0.2% previous MoM, and at 4.4% YoY from 4.7% previously. The slight gain in core inflation gave some marginal support to the US Dollar as it reduces the chances the Federal Reserve will turn dovish later in the year, but so far the currency has failed to follow through its initial lift to the upside. Markets still expect less aggressive policy tightening by the Federal Reserve, and are pricing in a smaller 25 bps Fed rate hike move in February, which keeps a lid on any meaningful upside for the Greenback. Friday’s US economic calendar also featured the release of Pending Home Sales data and the revised Michigan Consumer Sentiment Index, both of which came in above estimates, with Home Sales registering an unexpected 2.5% rise in December versus the -0.9% expected. The focus now shifts to the outcome of a two-day FOMC monetary policy meeting, scheduled to be announced next Wednesday. Heading into the key event risk, the major is more likely to prolong its consolidative price move. The US S&P500 was up 0.25% on Friday, taking its weekly gain to 2.5% while the Nasdaq index rose just under 1% for a weekly gain of 4.3%, the latter supported by some support for tech stocks and Tesla’s 33% gain over the week, with the company delivering on an anticipated strong result.

Expected ranges

• AUD/USD: 0.7000 – 0.7200 ▼
• AUD/EUR: 0.6450 – 0.6650 ▼
• GBP/AUD: 1.7250 – 1.7450 ▲
• AUD/NZD: 1.0800 – 1.1000 ▲
• AUD/CAD: 0.9350 – 0.9550 ▲