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AUD range bound as markets sideline major bets

Wednesday 26 May, 2021

Daily Currency Update

AUD - Australian DollarPrice action across currency markets was virtually non-existent on Tuesday with the AUD maintaining a narrow trading range as investors appeared content sidelining larger bets. With little headline news flow on hand to drive direction, the AUD tracked marginally higher, following equities and other risk assets upward amid sustained risk demand and a downward correction in global bond rates. Near term inflation concerns appear to have eased for now, helping underpin AUD supports at 0.7710 and 0.7680. As commodity prices shift off record highs and tensions with China continue to fester, we expect the AUD will remain largely range bound through the near term, struggling to extend beyond 0.7830 and 0.79. With little of note on today’s domestic ticket, our attentions turn to the RBNZ policy meeting and rate statement ahead of Friday’s all important US PCE inflation index. A hawkish surprise from the RBNZ could help drag the AUD higher while testing resistance on NZD/AUD and possibly opening the door for a break above 0.9330.

Key Movers

Price action across major currencies was absent on Tuesday with all major pairs maintaining a narrow range against the USD despite sustained dovish commentary from the Federal Reserve and a dip in 10 year treasury rates. Commentary from key FOMC officials failed to stray from party line, and only served to dampen expectations the Fed will move to adjust monetary policy in the face of risking inflation pressures. US 10 year treasury rates fell 3 basis points to 1.56%, their lowest handle in months and the USD struggled to move off multi-year lows. The Chinese yuan marked its highest level in almost 3 years as the USD weakened towards 6.40. While the currency has yet to break back through the high enjoyed in January and February the PBOC seem content in allowing the fixing rate to follow adjustments in market fundamentals which could allow for more CNY strength in the weeks and months ahead. Attentions turn to today’s RBNZ policy meeting and rate statement ahead of tomorrow’s Prelim GDP data and Friday’s PCE index inflation print.

Expected Ranges

  • AUD/USD: 0.7680 - 0.7830 ▼
  • AUD/EUR: 0.6290 - 0.6350 ▼
  • GBP/AUD: 1.8020 - 1.8420 ▼
  • AUD/NZD: 1.0650 - 1.0830 ▼
  • AUD/CAD: 0.9310 - 0.9410 ▲