Daily Currency Update

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Aussie drifts lower as risk appetite deteriorates

AUD - Australian Dollar

The Australian Dollar drifted slightly lower over the past 24 hours as the local currency has seen little movement in trading this week. Opening the morning at 0.6925, a risk-off market ensured the AUD/USD drifted off into negative territory seeing an overnight low of 0.6906. Investors continue to digest the latest updates from the escalating trade war between the United States and China where China is threatening now to restrict the exportation of rare earth minerals.

Shifting our focus domestically this morning we see both building approvals and private capital expenditure due for release today. Volatility is expected to increase next week in the lead up to the RBA’s interest rate decision on Tuesday where it is now fully priced for the first interest rate cut of 0.25% since August 2016 to 1.25%.With up to three cuts by the RBA now being priced in the market this year the Australian Dollar looks vulnerable below the key resistance level of 70 US cents.

From a technical perspective, the AUD/USD pair is currently trading at 0.6916. We continue to expect support to hold on moves approaching 0.6880 while now any upward push will likely meet resistance at 70 US cents.

Key Movers

Risk off sentiment favoured safe-haven currencies such as the USD and JPY, both rallying in overnight movements. The US Dollar Index (DXY) which measures a basket of currencies against the greenback charged through 98.00 to retest previous 2019 highs back on April 26th. After bottoming out at 97.55 on Tuesday the DXY reached overnight highs of 98.21.

With no end in sight for escalating trade wars between the Unites States and China, Gold was also a winner seeing a 0.2% rise on spot prices. 10-year treasury notes hit 20-month lows with speculation rising that the Federal reverse will need to cut rates at least once this year with markets currently pricing an 85% chance by October this year.

Political uncertainty in Great Britain continues to hamper the Pound as cable remained under pressure overnight. With increased liquidity from the return of traders following a UK Public holiday this week, GBP/USD dropped to 1.2614 and a retest of 2019 lows on May 23rd.

Currency markets are expected to move off Prelim GDP figures due to release this evening with a keen eye on Chinese manufacturing data scheduled on Friday.

Expected Ranges

AUD/USD: 0.6880 - 0.6960 ▼

AUD/EUR: 0.6180 - 0.6250 ▲

AUD/NZD: 1.0570 - 1.0700 ▲

GBP/AUD: 1.8000 - 1.8400 ▼

AUD/CAD: 0.9300 - 0.9400 ▲