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AUD breaks below 0.77 as bond correction prompts further losses

AUD - Australian Dollar

The Australian dollar fell through trade on Monday, slipping below 0.77 US cents amid a backdrop of risk aversion and USD strength. The AUD struggled through the domestic session as a risk off mood permeated Asian markets forcing the AUD toward supports at 0.77/0.7710. With little headline data on hand and an absence of major newsflow the AUD tracked sideways struggling to mount any real upward momentum before breaking toward intraday lows at 0.7636. Rising US bond yields continue to lift the USD and put downward pressure on emerging market and commodity pared currencies. The USD pushed through 6.50 against the Chinese Yuan for the first time since January, adding further pain and downward pressure to the AUD, a proxy to Chinese growth performance.

With little of note on today’s macroeconomic ticket we expect the AUD will struggle to find momentum as bond yields and risk appetite continue to drive direction. Having broken 0.77 our attention turns to supports at 0.7630 and 0.7580 with resistance on breaks approaching 0.7550 and 0.78 US cents.

Key Movers

The US dollar enjoyed strong gains through the start of the week as investors carried the momentum from the freshly signed fiscal stimulus bill into a new week while capitalising on further gains across bonds and US treasury yields. Emerging market and commodity pared currencies came under sustained pressure while the JPY and Euro underperformed. The Euro tested three and a half year lows breaking below 1.1850 as the single currency came under sustained pressure amid a slower vaccine rollout. Markets largely ignored reports Germany’s pace of immunisation was expected to increase with as many as 10 million Germans to receive Covid inoculations per week, perhaps an optimistic target given only 7.3 million have received the vaccine to date.

With little of note on today’s economic docket the current underlying narrative and bond prices will continue to drive direction.

Expected Ranges

AUD/USD: 0.7580 - 0.7750 ▼

AUD/EUR: 0.6390 - 0.6510 ▼

GBP/AUD: 1.7950 - 1.8280 ▲

AUD/NZD: 1.0680 - 1.0780 ▲

AUD/CAD: 0.9670 - 0.9750 ▼