AUD - Australian Dollar

The Australian dollar crept higher through trade on Wednesday, rebuffing the break below 0.77 to mark intraday highs at 0.7752. With little of note on the domestic ticket, the AUD was largely range-bound through the local session maintaining a narrow handle before a softer than anticipated US ADP employment print and weaker ISM Services data. While not headline macroeconomic indicators, the weaker than anticipated data showing dampened calls the rapid recovery would prompt a revision in tapering plans and prompted some USD weakness ahead of Friday’s non-farm payroll print. Volatility across equity markets drove mixed showings across key indices; the NASDAQ marking a fourth daily depreciation while the S&P 500 and Dow Jones look set to close higher.

Despite further gains across key commodities the AUD appears trapped in a see-saw battle between support and resistance. The narrowing range and heightened volatility across risk assets have prompted a series of lower lows through May thus far. While we remain optimistic the AUD will maintain momentum through the long term, a short-term break toward 0.76 is possible if risk demand doesn’t re-establish a solid footing.

Key Movers

The US Dollar Index fell through trade on Wednesday, testing key support lines at 91.20 amid softer than anticipated macroeconomic data sets. A contraction in activity across the services sector and weaker ADP non-farm payroll estimates dampened expectations the rapid rise in economic performance would prompt the Fed to bring forward monetary policy adjustments. Fed officials also offered little to suggest a policy change might be imminent. Members Mester and Clarida both toed the party line, affirming the FOMC’s commitment to accommodative monetary policy while directly dismissing calls to taper bond purchases.

Sterling continued its resurgence, edging marginally higher to break back above 1.39 while the euro tested a break below 1.20 before shifting higher into this morning open. A contraction in performance across services in France, Germany, Italy and Spain doused recent optimism the economy was primed for a rapid rebound in activity as restrictions ease.

Our attentions turn to tonight’s Bank of England policy meeting ahead of Friday’s non-farm payroll print, while increasing vaccine hesitancy in the US has seen the pace of immunisation slow, raising concerns around the future pace of recovery.

Expected Ranges

AUD/USD: 0.7680 - 0.7820 ▲

AUD/EUR: 0.6380 - 0.6490 ▲

GBP/AUD: 1.7820 - 1.8120 ▼

AUD/NZD: 1.0680 - 1.0820 ▼

AUD/CAD: 0.9450 - 0.9550 ▲

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