Home Daily Commentaries Australian dollar cements itself as the weeks worst performer giving up 0.70 US cents

Australian dollar cements itself as the weeks worst performer giving up 0.70 US cents

Daily Currency Update

The Australian dollar continued its downward correction through trade on Friday, unable to hold onto support at 0.7030 and 0.70 US cents. Fears inflation, an extended period of central bank monetary policy tightening and a slowdown in the global growth outlook prompted a further downward correction in markets appetite for risk. Risk aversion increased as measures for risk appetite continued to fall, marking new lows and highlighting the lack of demand for the AUD and commodity currencies in this environment. Having given up 0.7030 the AUD offered little resistance in approaching 0.70 US cents tumbling below this psychological handle to mark its lowest level in 18 months at 0.6968. Momentum has definitively shifted away from the AUD, ensnaring the currency in an aggressive bearish downturn. Having tested a break above 0.73 just two weeks ago the AUD has now given up over 3 cents as our attentions turn to key supports at 0.9630/50, a break below this handle could well signal an extended downturn toward 0.68.

Our attentions this week turn to the RBA’s first policy update for 2022. We are keenly attuned for any shift in message from policy makers and expect the board will announce a prompt end to QE supports while adjusting its plan for monetary policy tightening. Failure to meet market expectations could be the catalyst to drive the AUD lower.

Key Movers

Price action across the majors was choppy through trade on Friday with most maintaining a relatively narrow range amid conflicting macroeconomic data sets and rising geo-political tensions. US treasury yields fell after the US employment cost index printed lower than expected, while China’s PMI’s slipped toward 50, the mark that delineates growth or contraction and Euro area confidence fell to a nine-month low. The  dollar index tested new highs above 9, touching 97.43 before edging lower into the close, while the Euro clung tom moves approaching 1.11 and the GBP slipped below 1.34 and the Yen again gave up 115.

Momentum remains firmly behind the USD for now as our attentions turn to the ECB and Bank of England policy updates with more from Fed speakers expected ahead of labour market data and key inflation indicators.

Expected Ranges

  • AUD/USD: 0.6930 - 0.7050 ▼
  • AUD/EUR: 0.6220 - 0.6350 ▼
  • GBP/AUD: 1.8950 - 1.9280 ▲
  • AUD/NZD: 1.0620 - 1.0730 ▼
  • AUD/CAD: 0.8880 - 0.8890 ▼