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Australian dollar falls as equities close in the red

AUD - Australian Dollar

The Australian Dollar finished Friday evening below the 73 US cent handle as equity markets in the United States plunged once again into their third successive week of losses. Driven by a weakness in tech stocks, The AUD/USD fell from a high of 0.7324 midway through the North American session to 0.7289 on the market close.

Trading range for the week was narrow between 0.7254 and highs of 0.7344, continuing a sideways pattern since the start of September. Highs for the week were seen off a more bullish RBA September minutes release showing economic conditions are not as severe as expected.

This week is likely to be driven by offshore markets given there is a lack of domestic data on the horizon. The Australian dollar opens at 0.7291. We expect support levels to hold on moves approaching 0.7250, while any upward push will likely meet resistance at 0.7325.

Key Movers

Safe haven currencies were in favour on Friday evening as the Japanese Yen saw its fifth successive day gains against the greenback. A decline in equity markets, the Nasdaq (-1.2%) and Dow Jones (-0.70) meant the USD/JPY fell from 1.0610 to 1.0455 since last Monday and reached seven-week lows.

A fresh wave of COVID-19 cases in Europe look to have also taken the sting out of any potential recovery in markets as fresh lockdowns look to be put in force. Both Spain and the United Kingdom saw daily infection surge as governments look to contain cases with limiting gatherings and enforcing curfews.

The EUR/USD was little changed closing at 1.1837, while the Great British Pound fell by 0.47% to 1.2913 with plenty of news to digest. The potential for negative interest rates by the Bank of England and ongoing hopes for a Brexit agreement between the United Kingdom and Europe look set to heighten volatility for cable before the imposed negotiation deadlines by October 15th.

This week focuses on a number of speeches by Federal Reserve FOMC members including Fed Chairman Jerome Powell and Treasury Secretary Steven Mnuchin due to testify on the CARES Act before the House Financial Services Committee. A number of Manufacturing and Services PMI figures are also due for release in Europe, United Kingdom and the United States.

Expected Ranges

AUD/USD: 0.7250 - 0.7325 ▼

GBP/AUD: 1.7520 - 1.7900 ▲

AUD/NZD: 1.0750 - 1.0820 ▼

AUD/EUR: 0.6130 - 0.6190 ▼

AUD/CAD: 0.9600 - 0.9660 ▼