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Can the Aussie continue its ascent above 0.70?

AUD - Australian Dollar

After a week of solid gains for the Australian Dollar, Friday’s session was a relatively quiet one as the US markets were closed for Independence Day. With little news to drive markets, the Aussie dollar continued its ascent against the greenback, rising from 0.6930 to 0.6947 throughout trade, taking its weekly improvement to 1.2%. Although the AUD/NZD ticked up 20 points on Friday to touch 1.0640, the strong weekly performance by the Kiwi saw a 0.62% weekly decline for the cross, presumably due to the outbreak of new COVID-19 cases in Victoria.

On the macro front, we have domestic inflation data this morning which should continue to show little to no inflationary pressure to worry the RBA. It should also be a similarly gloomy story for the ANZ Job ads read, although the number edged 0.5% higher in May, the outlook for the labor market is still uncertain as businesses plan for a post-covid environment. Looking offshore, we have Eurozone investor confidence and retail sales data for May which are expected to paint a brighter picture than April given some restrictions have been lifted. Finally, we will get US services PMI out of the world’s largest economy to round out the session.

Without a lead in from the US market due to Friday’s holiday, it makes it hard to predict whether the AUD/USD can break through solid resistance at 0.6950. If we do see a breakthrough this handle during trade, it could open the door for bids above the key 70 cent handle. Any deterioration in the unfolding virus situation in Victoria, or in risk sentiment more broadly, could see the pair test initial support at 0.6902 before last weeks low of 0.6830.

Key Movers

As we touched on above, US markets were closed on Friday for Independence Day, rendering the day a quiet one for traders. The worlds reserve currency finished the week softly as the domestic COVID 19 case count continues its ascent, particularly in the southern states. Some commentary from ECB president Christine Lagarde over the weekend painted a bleak picture for the Eurozone as she listed the likely scenario of two years of downward price pressures as the economy transitions as a result of the pandemic. In the UK, Brexit talks ended prematurely last week as key issues around UK fishing waters and the role of the European court of justice remain sticking points.

Despite the 0.2% fall in the USD index on Friday, EUR/USD and USD/JPY both traded sideways throughout trade as volume was low. The EUR/USD traded between 1.1220 and 1.1249 with USD trading in a 10 point range with a high of 1.0755. Although the Brexit uncertainty we touched on above has kept the GBP upside contained, GBP/USD is slightly off Thursdays highs of 1.2529 however a trade deal with the EU could push the pair considerably higher with levels around 1.40 not being ruled out by markets.

Expected Ranges

AUD/USD: 0.6902 - 0.7000 ▲

AUD/EUR: 0.6130 - 0.6190 ▲

GBP/AUD: 1.7860 - 1.8090 ▼

AUD/NZD: 1.0580 - 1.0703 ▼

AUD/CAD: 0.9350 - 0.9430 ▲