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Australian dollar unable to maintain 2 month highs

AUD - Australian Dollar

The Australian dollar opened this morning at 0.6402 edging lower for a second consecutive day on Friday trimming most of its weekly gains. The Australian Dollar recorded an impressive rally throughout April. Australian Dollar strength over the last few weeks was exerted against anti-risk currencies, like the US Dollar and Japanese Yen, in particular. On the local data front on Friday the Commonwealth Bank Manufacturing PMI, which came in lower than expected, fell to 44.1 in April, while the AIG Performance of Manufacturing Index for the same month plunged to 35.8 from 53.7 previously. We also saw the release of March New Home Sales which fell by 21.1%, after advancing 6.2% in the previous month.

Looking ahead this week and will see the release of March Building Permits, with market expectations seen down by 15% after advancing 19.9% in the previous month. From a technical perspective, the AUD/USD pair is currently trading at 0.6385. We continue to expect support to hold on moves approaching 0.6350 while now any upward push will likely meet resistance around 0.6440.

Key Movers

The USD Dollar advanced through trade on Friday as a sustained risk off run permeated equity and currency markets, prompting a broad correction in risk asset values. The Dollar index advanced four tenths of a percent, marking a 1% advance on the week as escalating tensions between China and the rest of the world as to the origin of the coronavirus, persistent softness across macroeconomic indicators and fears a second wave of infections will materialise as economies open up forced investors toward haven assets.

Risk sentiment remains the primary driver across currency markets and as optimism falters we anticipate the USD will remain well bid. The recent risk sentiment correction has raised questions as to the speed and timing behind the v-shaped recovery in equity and currency markets following the March sell off. Indicators suggest the recession may last longer than first anticipated and as such the current recovery may be nothing more than a bear market bounce, opening the door to another risk off run, bolstering support for the USD.

The Euro has reached an inflection point with risks still skewed to the downside. Having bounced back through 1.0950 attentions this week turn to EU leaders (Friday) with investors keenly attuned to any details surrounding the proposed COVID-19 support package, while US jobless claims, services data, durable goods orders and non-farm payroll numbers dominate the macro docket through the latter half of the week.

Expected Ranges

AUD/USD: 0.6250 – 0.6450 ▼

GBP/AUD: 1.9400 – 1.9600 ▼

AUD/NZD: 1.0500 – 1.0700 ▲

AUD/EUR: 0.5750 – 0.5950 ▼

AUD/CAD: 0.8900 – 0.9100 ▼