AUD makes new highs and consolidates break above US$0.65
Daily Currency Update
The Australian dollar extended its recovery through trade on Tuesday, buoyed by improved risk sentiment and demand across Asian Currencies. The sustained recovery in the value of the Chinese yuan amid stronger People's Bank of China fixings and a USD retreat has helped spur demand across the region, underpinning the AUD recovery and helping consolidate a break above key technical resistance levels. Having broken below the psychological ¥7.20 the USD/CNY trended toward intraday lows at ¥7.12 before finding support. With the USD on the backfoot, the AUD trended toward fresh 3-month highs testing a break above key technical resistance levels and marking intraday highs at US$0.6586 before edging lower overnight and trading back toward US$0.6550. If the AUD can sustain a break above US$0.6560 it could open the door to a consolidated run toward US$0.66/67.Our attention now turns to the Fed meeting minutes and commentary from RBA Governor Michelle Bullock. The Australian rates are almost alone now in pricing further tightening within this tightening cycle we are keenly attuned to any RBA commentary that affords insight into future policy decisions.
Key Movers
The US dollar faced sustained headwinds Tuesday as US 10-year rates consolidated near two-month lows and domestic existing home sales fell at a much faster pace in October than expected, suggesting the Fed’s aggressive approach to tightening financial conditions is impacting the broader economy, muting the need for further rate adjustments. Against a backdrop of lower rates Asian currencies found support with the CNY and JPY both outperforming. The USD/JPY slipped below ¥148, marking lows at ¥147.15 before finding support.The Great British pound traded largely flat for the day, consolidating a break above US$1.25 while the euro was the day's big loser. The single currency was the only major not to extend on gains against the USD as uncertainty grows surrounding Germany’s budget crisis after a constitutional court ruling blocked access to key off-budget spending tools creating a near 60 billion euro funding gap. The euro slumped below US$1.0950 marking intraday lows at US$1.0901 before finding support. Our attention now turns to the Fed meeting minutes. After last week's softer inflation print, we expect little shift in Fed policy, however, any jawboning that suggests a December rate hike is still on the table could trigger a reversal in recent gains and help the USD pare losses while a dovish undertone will help elevate market confidence in calls the Fed has reached the end of its tightening cycle.
Expected Ranges
- AUD/USD: 0.6420 - 0.6600 ▲
- AUD/EUR: 0.5920 - 0.6020 ▲
- GBP/AUD: 1.8900 - 1.9300 ▲
- AUD/NZD: 1.0800 - 1.0900 ▼
- AUD/CAD: 0.8880 - 0.9050 ▼