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AUD climbs back toward 0.78 US cents yet remains firmly range bound

Friday 21 May, 2021

Daily Currency Update

AUD - Australian DollarThe Australian dollar climbed steadily throughout Thursday, reversing Wednesday’s risk off shift. The risk off tone that enveloped markets mid-week faded, as investors revised their initial knee jerk reaction to the Fed and FOMC policy meeting minutes. While acknowledging the shift in Fed rhetoric, a broader review showed those policy makers calling for a tapering of bond purchases were firmly in the minority and the Fed’s commitment to accommodative monetary policy remains intact. Having touched intraday lows at 0.7720, the AUD advanced through the afternoon and overnight to touch session highs at 0.7780. We are again entrenched within a narrow trading handle as near-term inflation and pandemic concerns counter long-term optimism and elevated commodity prices. Our attentions today turn to a slew of PMI data prints as markers for future inflation. Watch supports at 0.7720 and 0.7680 with resistance on moves above 0.78 and approaching 0.7830.

Key Movers

The US dollar gave up Wednesday’s gains retreating against most majors, as markets quickly shook off the risk off mood, instead driving gains across equities and risk assets. Having slipped below 1.2170, the euro climbed back through 1.22 to touch intraday highs at 1.2230, while the GBP bounced off 1.41 and closed in on another break above 1.42. The momentum the USD enjoyed in the wake of the Fed minutes was shallow and investors have been quick to reverse the USD uptick maintaining the overwhelming bearish outlook. The USD continues to trade near multi-year lows and until we see a definitive shift in the broader risk narrative, or a return to traditional price action where in diverging monetary policy programs and economic performance drive direction, we expect the dollar will remain subdued. Our attentions today turn to a host of PMI data sets. With inflation concerns still a key driver of near-term direction, we are keenly focused on performance through April.

Expected Ranges

  • AUD/USD: 0.7680 - 0.7830 ▲
  • AUD/EUR: 0.6330 - 0.6410 ▲
  • GBP/AUD: 1.8120 - 1.8420 ▼
  • AUD/NZD: 1.0720 - 1.0830 ▲
  • AUD/CAD: 0.9330 - 0.9420 ▲