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AUD fails to hold onto break above 0.78 despite sustained strength across commodity prices

AUD - Australian Dollar

The Australian dollar struggled to extend beyond recent ranges, drifting lower overnight having failed to consolidate moves beyond 0.78 US cents. While treasury yields and equities continue to run higher, currency markets offered little to excite investors as the correlation across asset classes weakens. Having touched intraday highs at 0.7805 through the domestic session, the AUD retreated overnight, briefly dipping below 0.7750 before edging back toward 0.7760 on open this morning.

News flow remains light and markets appear content in treading water ahead of key updates through the latter half of the week. US core retail sales will provide further guidance as to consumer health in the US and perhaps offer a marker for inflation concerns ahead of tomorrow’s local labour market report. Employment data remains a critical indicator of economic health coming out of the pandemic and a soft read may provide the RBA impetus to extend its QE program beyond September, while a stronger showing could well be the catalyst to push the AUD through topside resistance.

Key Movers

In what was a largely lackluster session across major currencies, the US dollar edged higher overnight while the euro continued to bounce between 1.21 and 1.2150 despite a widening in euro and US bond rates and a marginal upward revision in Q4 GDP. While near term ranges remain largely intact, we still anticipate the single currency will weaken through the latter half of the year as the recovering of the common marketplace lags that of other major counterparts and the divergence in vaccine schedules play a bigger role in currency values. The Great British pound edged off highs at 1.3950, briefly slipping below 1.39 before settling between 1.3910 and 1.3920 into this morning's open.

With little change in the underlying market narrative, we turn our attention to US retail sales. After significant weakness in December, we anticipate a bounce back in January.

Expected Ranges

AUD/USD: 0.7650 - 0.7820 ▼

AUD/EUR: 0.6380 - 0.6430 ▼

GBP/AUD: 1.7780 - 1.8060 ▲

AUD/NZD: 1.0720 - 1.0810 ▼

AUD/CAD: 0.9790 - 0.9880 ▲