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Aussie finds some support as sentiment improves

AUD - Australian Dollar

Despite improved risk sentiment and an uptick across risk assets, the Australian dollar continued to give up ground to most major counterparts through trade on Thursday, drifting lower and testing key supports. The AUD broke below 0.7080 and drifted toward intraday lows at 0.7020 before edging higher overnight amid signs a US fiscal stimulus package is still on the table. Comments from Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi helped reinvigorate expectations surrounding a federal COVID-19 rescue plan, driving equities higher and propping up growth sensitive currencies.

The AUD remains vulnerable to further corrections in risk sentiment as markets re-assess expectations for global growth amid the uncertainty of a second Coronavirus wave. Sentiment continues to drive direction as markets largely ignore underlying fundamentals, opening the door to increased volatility in the weeks and months leading into the US presidential election. Should market appetite for risk continue to sour, the AUD could test psychological supports at 0.70 and find itself trading between 0.68 and 0.70 US cents through the short-term.

Key Movers

Softness across haven assets saw the USD, CHF and JPY give up gains overnight, as improved risk sentiment prompted a push back toward growth led assets. Having broken below 1.1650 to touch 1.1630, the euro recouped losses pushing back toward 1.17 even while the ECB issued another 175billion in cheap three year funding to banks across the currency bloc.

The Great British pound tested a break below 1.27 touching 1.2690 before pushing back toward 1.28, running out of steam at 1.2770. Sterling remains vulnerable to volatility, as fears unemployment levels will rise when the current unemployment support program ends and the likelihood of further lockdowns as restrictions tighten in a bid to combat the second wave in infections, force investors to continually reassess positions.

Attentions remain with current themes as headlines direct sentiment and dominate direction into the weekly close.

Expected Ranges

AUD/USD: 0.6980 - 0.7130 ▼

AUD/EUR: 0.6020 - 0.6130 ▼

GBP/AUD: 1.7820 - 1.8280 ▲

AUD/NZD: 1.0710 - 1.0850 ▼

AUD/CAD: 0.9360 - 0.9490 ▼