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Aussie falters as risk sentiment sours

AUD - Australian Dollar

The AUD upturn faltered through trade on Wednesday as risk sentiment shifted, and investors looked to haven assets. Extended global lockdowns, lower quarter end dividends and a shift in tone from President Trump all sparked the risk off shift forcing the AUD back below 0.61 to intraday lows at 0.6040. Having touched 17 year lows at 0.5510 in mid-March the AUD has enjoyed a sustained upturn, buoyed by improvements in investor confidence and easing market panic. Wednesday’s shift in risk sentiment highlights the AUD vulnerability as suggestions emerge the recent uptick was nothing more than a bear market bounce.

Direction will again be driven by ever changing coronavirus headlines and as the pandemics spread shows little signs of slowing at this point the possibility of extended global lockdown and isolation increases. Having come to a grinding halt the global economy will undoubtedly tip into a lengthy recession an environment that does not support a sustained AUD upturn and as long as the coronavirus continues to shut down conventional economic activity the AUD is open to another bear run and could well test March lows should timelines extend deep into H2 and 2021.

Key Movers

The risk off shift help bolster demand for the JPY and USD through trade on Wednesday as both currencies advanced near 1% against most other major counterparts. The USD remained well bid, doubling down on gains enjoyed through month end rebalancing, edging upward across a variety of key indices, while forcing the EUR back below 1.10.

Attentions now turn to US unemployment claims as a critical early marker of just how deep and widespread the economic impact of the COVID19 pandemic will be. Last week 3.3 million people filed for unemployment with conservative estimates suggesting a further 3.6 million will join the queue, with some economists forecasting a read nearer 6 million. As the coronavirus brings both domestic economies and the global economy to a grinding halt another poor unemployment read will only highlight the expense that lays before governments in supporting their citizenry through this unprecedented crisis.

Expected Ranges

AUD/USD: 0.5830 - 0.6180 ▼

AUD/EUR: 0.5430 - 0.5620 ▼

GBP/AUD: 1.9980 - 2.0730 ▲

AUD/NZD: 1.0080 - 1.0330 ▼

AUD/CAD: 0.8480 - 0.8730 ▼