AUD/USD steady above 0.7340 key support, but Aussie lags its G10 peers

AUD/USD is consolidating close to the 0.7350 mark on Tuesday, the pair currently trading with gains of just over 10 pips or slightly more than 0.1%.

AUD continues to lag key G10 peers

Although AUD/USD is a little higher on Monday, the Aussie continues to lag some of its key G10 peers in terms of performance vs the weakening US dollar on Tuesday. Indeed, while AUD is up 0.2% on the day vs the US dollar, this gain trail the likes of CAD (up 0.4%), GBP and NZD (both up over 0.5%) and EUR (up around 0.9%).

It is difficult to pinpoint exactly why AUD is underperforming on Tuesday. Indeed, markets are relatively risk-on at the moment (S&P 500 trades 1.3% higher), which would typically work in the risk-sensitive AUD’s favour and gold prices are significantly higher and back above $1800 (AUD, a big gold exporter, has a positive correlation to the precious metal). Moreover, Chinese Caixin manufacturing PMI data released during Tuesday’s Asia session was much stronger than expected and rose to 10-year highs, signalling continued strength in Australia’s most important export market.

Turning to domestic AUD factors; Australian data on the week thus far has been mixed. On Monday, Company gross operating profits (Q3) were weaker than anticipated but business inventories (Oct) were strong. On Tuesday, Building approvals (Oct) and Current Account (Q3) data were strong, although Net Export Contributions to GDP (Q3) were weaker than anticipated. Official Q3 GDP data is released during Wednesday’s Asia session, and perhaps weakness in the pre-released Net Export Contribution to GDP data is weighing on expectations and also AUD.

Tuesday’s Asia session also saw the RBA release its latest interest rate decision; the RBA delivered no surprises (rates and QE were held) and sounded balanced on the economic outlook, thus not moving AUD much. Markets get to hear directly from RBA Governor Lowe at 00:00GMT on Wednesday.

AUD/USD down from recent highs, but remains supported above 0.7340

AUD/USD remains supported above the key 0.7340 level, which was the 9 and 17 November highs, as well as Monday’s low. That implies that the path of least resistance lies to the upside, meaning a gradual grind higher back towards recent highs just above 0.7400 is likely. However, if the 0.7340 level does go, this would open the door to a move back towards the 0.7300 level and then the pair’s 21-day moving average around 0.7287.

AUD/USD two hour chart