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AUD vulnerable as global stocks collapse and risk appetite wanes

Wednesday 10th February 2016
The Australian dollar edged downward through much of trade on Tuesday amidst plunging oil prices and unsteady global equity markets. The Aussie dollar followed a 7% decline in oil prices, touching intraday lows at 0.6971 before support kicked in and sent the unit back through the psychological 0.70 cent handle. With little fundamental drivers available to steer direction the AUD remains vulnerable to wider risk trends and trader sentiment. Increasing concerns surrounding a global slowdown and its dampening effect on commodity prices (led by oil) limit the upside potential of any AUD rally at present. Last week’s push through 0.72 and rapid sell off highlights the current environment of volatility as traders look to reverse out of risk asset holdings and flock toward haven assets in the form of the Japanese Yen and Swiss Franc. Attentions today turn offshore to Fed Chair Janet Yellen as she testifies before Congress on the state of Monetary Policy. Investors will be keenly attuned to the language employed by the Central Bank head seeking a marker on forward policy direction. A hawkish undertone could fuel and Greenback rally while a cautious commentary will likely extend the timeline of expectation surrounding a second interest rate increase and force the USD lower.

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Today's expected range

AUD / USD
0.6930 - 0.7180
NZD / USD
0.6510 - 0.6730
GBP / AUD
2.0250 - 2.0650

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Last Week Market Recap

Monday 1st February 2015

Extended its previous week’s gains last week as Australia reported better than expected economic numbers while the FOMC released a somewhat dovish statement. The week began with the pair declining on Monday after Australian NAB Business Confidence printed at 3 compared to a previous reading of 5. The rate then gained ground on Tuesday after making its weekly low of 0.6917 despite a better than expected U.S. consumer confidence number. The pair continued higher on Wednesday as the FOMC left rates unchanged and after Australian Trimmed Mean CPI increased +0.6% q/q versus +0.5% expected, while CPI increased +0.4%, in line with expectations. Thursday saw the rate extend its rally after Australian Import Prices declined -0.3% q/q compared to an expected decline of -0.8%, while the United States reported lower than expected U.S. Durable Goods Orders data. The pair then made its weekly high of 0.7140 on Friday before consolidating after Australian PPI increased +0.3% q/q versus +0.6% expected. AUD/USD closed at 0.7082, with an overall gain of +1.1% from its previous weekly close.

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