Home Daily Commentaries AUD rallies as commodity prices rise and economy re-opens

AUD rallies as commodity prices rise and economy re-opens

Daily Currency Update

AUD - Australian Dollar

The Australian dollar extended beyond resistance at 0.73 US cents through trade on Monday, buoyed by the re-opening of the New South Wales economy and a broad uptick across key commodities, namely, coal, copper, and iron ore. Having toyed with a break above 0.73 in the wake of last weeks softer than expected US non-farm payroll print the AUD tracked sideways through the early stages of the domestic session before gathering momentum through the afternoon and overnight. Rallying to touch intraday and 1-month highs at 0.7370 the AUD opens this morning buying 0.7345 US cents. The question now; can the currency maintain this upward momentum? Underlying commodity prices remain strong as Iron ore bounces off the lows seen at the height of the Evergrande saga and Coal continues to mark new record highs as fears the ongoing energy crisis will continue to stoke increased demand, offering a floor under the AUD near the August low. Markets however continue to lack any real conviction in direction, and we anticipate near term volatility will continue with the AUD range bound between 0.71 and 0.75 US cents. Our attentions today turn to NAB’s domestic business confidence survey ahead of Key US inflation data Wednesday and Thursday’s unemployment print.

Key Movers

There was plenty of movement across major currencies through trade on Monday as commodity led units enjoyed sustained support while key haven currencies suffered steep falls. The Japanese yen was the days big looser plunging 1% against the USD, marking its lowest level in nearly 3 years. As inflationary fears continue to build Japan and the BoJ face the ongoing problem of domestic inflation remaining stubbornly too low. With little price pressure there is no need for policy makers in Japan to follow the hawkish stance of other major central banks and begin unwinding an uber accommodative monetary policy platform. With little hope of an interest rate hike in the foreseeable future a widening USD/JPY rate differential has fuels demand for the USD, driving JPY losses across the board. JPY weakness through the last 24 hours has helped prop up the USD with the DXY index up a quarter percent an eyeing a year to date high. Despite recent outperformance among some commodity currencies, sustained GBP, EURO and JPY weakness continue to fuel index gains and should add a floor under the USD through the near term.

Expected Ranges

  • AUD/USD: 0.7270 - 0.7420 ▲
  • AUD/EUR: 0.6290 - 0.6420 ▲
  • GBP/AUD: 1.8380 - 1.8720 ▼
  • AUD/NZD: 1.0520 - 1.0630 ▲
  • AUD/CAD: 0.9090 - 0.9220 ▲