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Australian dollar marches on, a break above 0.78 in sight

AUD - Australian Dollar

The Australian dollar extended the weeks uptrend on Thursday, creeping through 0.7750 to mark fresh highs at 0.7772. With volatility across currency markets largely muted this week the AUD has enjoyed a methodical and measured march back toward 0.78, up almost 2 cents on last Friday’s domestic close. With little macroeconomic data on hand to drive direction, markets have shifted their attentions back toward long run fundamental expectations. Hopes for a H2 global economic recovery, coupled with higher commodity prices, US inflation and budget deficit concerns, have helped fuel demand for the AUD. While the dollar remains firmly entrenched in recent ranges, the shift in narrative and the end of the USD’s mini resurgence means a break outside trend lines is again skewed to the upside. With little of note on today’s domestic docket and the Chinese New Year holiday commencing we expect price action will remain thin leading into next weeks RBA meeting minutes and key growth indicators.

Key Movers

In short there was very little movement across major currencies through trade on Thursday. A lack of high-level macroeconomic data sets and an absence of headline newsflows allowed investors to consolidate recent moves and reassess the underlying market narrative. The euro held onto gains above 1.21 but failed to extend beyond 1.2150, while the Great British pound gave up highs at 1.3855 yet held on above 1.38. Investors appeared content to sit on the sidelines ahead of further US fiscal stimulus advice and next weeks key services and manufacturing PMI’s. With national lockdowns expected to dampen growth prospects, a surprise to the upside could help fuel the risk positive narrative and force the USD back toward 3 year lows.

Expected Ranges

AUD/USD: 0.7620 - 0.7820 ▲

AUD/EUR: 0.6320 - 0.6430 ▲

GBP/AUD: 1.7720 - 1.7990 ▼

AUD/NZD: 1.0680 - 1.0750 ▲

AUD/CAD: 0.9780 - 0.9890 ▲