Aussie break above 0.60 short-lived as upside moves meet resistance

AUD - Australian Dollar

The Australian dollar enjoyed mixed fortunes through trade on Wednesday, pushing back through 0.60 US cents before correcting lower into the daily close, opening this morning largely unchanged at 0.5960. Improvements in demand for risk continued through Wednesday as investors responded to the $2 trillion stimulus package approved by Congress. Specific details are yet to be released but treasury secretary Mnuchin and Republican leader Mitch McConnell have intimated the plan will reach those hardest hit by the crisis, prop up the labour market and cushion the blow of looming recession for all Americans. The AUD enjoyed a strong risk on drive in the wake of the announcement breaking resistance at 0.60 and extending to intraday highs at 0.6065 before correcting lower as profit taking, and the broader risk profile prompted a move back toward 0.5950.

With improvements in risk sentiment helping prop up the AUD, we expect supports above last weeks 0.5510 low to hold through the short term. Markets are beginning to respond to the record levels of stimulus passed through by governments around the globe, while the Fed’s unprecedented loosing of financial conditions have helped ease liquidity concerns. While there is scope for the AUD to recoup losses suffered through the middle of March, the looming and unrelenting coronavirus pandemic continues to cast a pall over markets, weighing on moves to the upside. We anticipate resistance on runs above 0.60/0.6050.

Key Movers

The US dollar index fell for a second consecutive session as risk sentiment improved following US lawmakers announcement of a $2 trillion dollar stimulus package. Equities and stocks surged while commodity led and emerging market currencies jumped higher as demand for safe haven assets eased and investor's confidence grew in the wake of stimulus plan. While the specifics of the plan are yet to be released as the bill is set to be rushed through the House and Senate in the latter half of the week we expect it will target key industries devastated by the coronavirus, while propping up the labour market and cushioning the blow of the looming recession with cheques for most Americans. The dollar index fell 0.81% to 101.87, led by gains in key counterparts. Sterling’s upturn continued pushing through 1.19 while the Euro advanced 1%, testing 1.09. The single currency found added support following Germany’s decision to remove its debt break, freeing Chancellor Merkel to deliver record stimulus. Germany’s economy was already faltering prior to the crisis and estimates suggest 20% could be wiped off Europe’s engine room in the wake of the coronavirus. As confidence across Europe tumbles, stimulus measures are a welcome reprieve and may lend the Euro some short term support.

Attentions remain squarely affixed to the evolving coronavirus pandemic and while we have seen a correction in USD through the last two days, we expect the worlds base currency will remain will bid in the face of ongoing uncertainty.

Expected Ranges

AUD/USD: 0.5510 - 0.6050 ▲

AUD/EUR: 0.5350 - 0.5610 ▼

GBP/AUD: 1.9550 - 2.0520 ▲

AUD/NZD: 1.0030 - 1.0220 ▼

AUD/CAD: 0.8350 - 0.8680 ▼