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AUD falters on approach to 0.77, drifting back toward supports at 0.76

AUD - Australian Dollar

The Australian dollar trended lower through trade on Wednesday drifting back toward 0.76 US cents. In what has been a quiet week thus far, the AUD struggled to maintain direction enjoyed through trade yesterday giving up highs approaching 0.77 amid a broader correction across commodity currencies. With few catalysts available to drive direction, investors continue to lack conviction sidelined by uncertainty surrounding the pace of recovery. While the recent shift in risk sentiment has dampened near term AUD demand, we anticipate ongoing immunisation programs and a diminishing COVID-19 impact will prompt a return to increased global growth and a positive risk premia. Having struggled to extend beyond 0.7680 we expect the AUD will remain vulnerable on moves approaching this handle with our year-end forecast revised down from 0.82 – 0.85 to highs nearer 0.80.

With little of note on today’s macroeconomic ticket we expect the AUD will remain range bound bouncing between 0.7580 and 0.7700 US cents.

Key Movers

The US dollar crept higher through trade on Wednesday advancing against most major counterparts outside the euro. The FOMC minutes offered little to prompt a shift in broader market outlooks, only affirming the Fed's current policy stance and commitment to backward looking policymaking. The euro kept pace with the USD pushing through 1.19 to touch highs at 1.1915 before shifting back toward 1.1870 on open this morning. The GBP continued the weeks struggles giving up 1.38 to touch session lows at 1.3720. Having moved below 1.39 on Tuesday, the sustained weakness remains a mystery as there appears no obvious catalyst for the sterling correction. The only headline event perhaps weighing on the pound was confirmation that the UK medical regulator revised its advice surrounding AstraZeneca’s vaccine suggesting those under 30 should be given an alternative. With the UK’s immunisation program heavily reliant on AstraZeneca’s vaccine, the darkening clouds have perhaps dampened optimism for a speedy post COVID-19 rebuild.

With little of note on the day's macroeconomic ticket our attentions remain with variable market flows. We expect price action across currency markets will remain largely muted, save for an unscheduled news flow shock.

Expected Ranges

AUD/USD: 0.7530 - 0.7720 ▼

AUD/EUR: 0.6370 - 0.6490 ▼

GBP/AUD: 1.7920 - 1.8180 ▲

AUD/NZD: 1.0790 - 1.0870 ▲

AUD/CAD: 0.9550 - 0.9680 ▼