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AUD holds onto gains in otherwise lacklustre session

AUD - Australian Dollar

The Australian dollar tracked sideways through trade on Tuesday, maintaining a relatively narrow range in what was a largely uneventful trading day. Having extended beyond 0.77 on Monday the AUD held onto gains bouncing between 0.7710 and 0.7740 as markets looked to consolidate positions following a 6-day risk positive run. Strength across Chinese Credit Data helped underpin the recovery narrative with slower growth in money supply evidence the PBoC is tightening financial conditions. The AUD found support in a stronger CNY and outperformance across commodity prices while a broadly weaker dollar opens the door for another push toward 0.78 US cents.

With little of note on today’s macroeconomic docket we expect price action to remain narrow. Resistance on moves toward 0.78 and 0.7820 remain intact while support above 0.7570/0.7550 is expected to hold through the short term. Having weathered the USD’s mini resurgence market attentions are again returning to macro themes and expectations for a global recovery. Should the positive risk narrative find renewed support the AUD could well test the top end of recent ranges.

Key Movers

The US dollar weakened through trade on Tuesday, extending Monday’s losses against major counterparts, except for the NZD. Reports Mario Draghi is on the precipice of forming a collation government and becoming the new Italian Premier helped lower Italian bond yields and drive euro gains. Draghi is tipped to be the saviour of the Italian economy and expected to save the country from economic ruin. He has already signalled the need to prioritise a common EU budget, sagely direct Italy’s share of the EU recovery fund and increase focus on fiscal reform. Having pushed through 1.21 overnight the euro has well and truly bounced off last week's dip below 1.20. That said we still see the single currency softening through the back half of the year as the Eurozone recovery lags that of major counterparts.

With little of note on today’s domestic docket our attentions turn to commentary from Fed-chair Jerome Powell. With the Fed President expected to offer little beyond the current narrative price action across currency markets will likely remain muted.

Expected Ranges

AUD/USD: 0.7570 - 0.7820 ▲

AUD/EUR: 0.6350 - 0.6420 ▼

GBP/AUD: 17780 - 1.8020 ▲

AUD/NZD: 1.0620 - 1.0720 ▲

AUD/CAD: 0.9790 - 0.9850 ▼