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Aussie falls 0.7% as Greenback fights back

AUD - Australian Dollar

The Aussie fell 0.7% on Friday after a resurgent USD finally found some support and rose 0.4% against a basket of currencies. Opening this morning at 0.7140, the Aussie looks to tread water as Victoria enters stage four lockdowns.

It was a day of 2 halves for the Aussie with the Asian session trading around the 0.72 level, its highest point in more than a year on the back of USD weakness. Nevertheless, during the American session the Greenback clawed its way back significantly with the USD Index rebounding from its lowest level in more than two years. Despite the resurgence, the Greenback still recorded its worst monthly fall since January 2018. The catalyst for the shift wasn’t an obvious one in this case with the Democrats and Republicans both still in a stalemate and little economic data to drive direction. Nevertheless, the Greenback was oversold after its recent big move lower and the movement upward is a sign of consolidation.

Moving into a new week, the Aussie will keep a close eye on Victoria with little on the economic calendar to drive direction. Off-shore, the Aussie will again trade to the beat of the see-sawing USD.

Key Movers

The USD edged higher through trade on Friday, climbing against a basket of major counterparts having touched two-year lows. In the absence of any headline data event or obvious catalyst the Bloomberg dollar index advanced half a percent as investors appeared to take profit and cover shorts in a broad based month end re-balancing. A shift in risk sentiment drove direction into the weekly close as the Euro gave up upside while the JPY, NZD, AUD and GBP all drifted lower. The Eurozone recorded it largest contraction on record through Q2 and inflation rose unexpectedly. The surprise print had little impact on markets but did take some of the sheen off the recent rally.

With US lawmakers unable to reach an 11th hour stop gap agreement, fiscal stimulus remains in sharp focus this week. With unemployment benefits ending last week and Treasury Secretary, Steven Mnuchin suggesting “there is still a lot of work to do” a long and protracted debate between Republicans and Democrats risks hurting consumer led growth. Political uncertainty is creating added downward pressure on the USD and despite Friday’s bounce the broader outlook remains bearish.

Expected Ranges

AUD/CAD: 0.9522 - 0.9626 ▲

AUD/EUR: 0.6009 - 0.6112 ▼

GBP/AUD: 1.8244 - 1.8427 ▲

AUD/NZD: 1.0715 - 1.0822 ▲

AUD/USD: 0.7089 - 0.7218 ▲