Aussie upturn stalls as US labour market underpins USD

AUD - Australian Dollar

The Australian Dollar fell through trade on Thursday, slipping back below short-term resistance at 0.7150 to touch intraday lows at 0.7117. Having touched 0.7170, a three-month high, earlier in the week the AUD gave up gains as investors sort to take profit while the USD found support in stronger than anticipated PPI and labour market data.

Having pushed through resistance on Wednesday the AUD appeared poised to make a run toward 0.72 US cents yet investors appeared reluctant in extending upside moves as domestic pressures and expectations of a future rate adjustment weigh on upside momentum.

Attentions today now turn to the RBA Financial Stability Review and Chinese Trade Balance data for direction into the weekly close. Strength across Chinese trade data could help foster a run back toward resistance while softness will weigh heavy on global growth concerns and could force the AUD back below 0.71 U.S Cents.

Key Movers

The US dollar advanced against most major counterparts on Thursday as labour market strength and improved PPI data assuaged investors’ concerns the economy is headed for a sharp slowdown. Unemployment claims fell to a near 50-year low last week, bolstering confidence in the labour market, while Producer Prices grew at their fastest pace in 5 months easing pressure on the Fed and downgrading the likelihood of a cut rates through the later half of the year. The dollar index moved back through 97 to trade at 97.17 at time of writing.

Sterling fell through trade on Thursday as investors grappled with the ramifications of a delay to the Brexit processes of up to six months. At an emergency summit EU leaders granted the UK a Brexit extension, postponing the official divorce date until October 31. The pound fell through 1.31 to touch intraday lows at 1.3053 while one-month volatility plunged to its lowest level since August. The extension and dip in implied volatility suggest Sterling will maintain recent ranges and continue to bounce between 1.29 and 1.32 as markets await clarity on when and how Britain will extricate itself from Europe.

Expected Ranges

AUD/USD: 0.7080 - 0.7170 ▼

AUD/EUR: 0.6280 - 0.6380 ▼

GBP/AUD: 1.8180 - 1.8580 ▲

AUD/NZD: 1.0520 - 1.0620 ▲

AUD/CAD: 0.9475 - 0.9575 ▲