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Positive risk tone helps AUD bounce off supports

Tuesday 9 November, 2021

Daily Currency Update

AUD - Australian Dollar

The Australian dollar extended back above 0.74 US cents on Monday, buoyed by a largely positive shift in risk sentiment. Having tracked sideways for much of the domestic session, bouncing between 0.7385 and 0.7410 the AUD rallied overnight, marking intraday highs at 0.7430. Having given up mid-year highs in the wake of the RBA policy update last week the AUD has seemingly found support on moves approaching 0.7380. With critical event risks now behind us we anticipate a much more sedate trading pattern this week ahead of Thursday’s unemployment print. As the South eastern States continue their re-opening, we expect a reasonable jump in the number of Jobs created and an uptick in the underlying unemployment rate as more people rejoin the labour market and the participation rate increases. Labour market performance will be critical in governing RBA policy moving forward. A recovery across the labour market that drives real wage growth could prompt policy makers to adjust forward guidance and bring forward an interest rate hike. That said, we anticipate this month’s print will pass with little fanfare. Direction continues to be driven by broader global forces and corrections in the risk narrative. We continue to watch supports at 0.7380 with resistance on moves approaching recent highs at 0.7550.

Key Movers

A positive risk tone drove the USD, CHF and JPY lower through trade on Monday. With last weeks risk events now behind us and the RBA, ECB, BoE and Federal Reserve all refusing to drawn on bringing forward guidance for interest rates investors looked to chase risk assets higher. Equities trended higher and US treasuries gave up Friday’s rally as the positive risk on shift spilled into currency markets. Outside an NZD surge the GBP is one of the days standout performers despite a slew of negative headlines. Yields on UK gilts fell to a record low while reports the UK may look to invoke article 16 of the Northern Ireland Protocol. The Article introduced as part of Brexit negotiations was designed to act as safeguard if either side identifies a negative economic, societal or environmental impact as a result of new trade rules. The UK is pushing to change 5 key sticking points within the Northern Ireland protocol and threatening to invoke article 16 could well blow up in their face and further damage the already fragile domestic economic recovery. Our attentions turn now to commentary from Bank of England Governor Bailey and Fed chair Jerome Powell, while US PPI data headlines the macroeconomic ticket.

Expected Ranges

  • AUD/USD: 0.7380 - 0.7550 ▲
  • AUD/EUR: 0.6370 - 0.6450 ▲
  • GBP/AUD: 1.8120 - 1.8380 ▲
  • AUD/NZD: 1.0290 - 1.0420 ▼
  • AUD/CAD: 0.9180 - 0.9270 ▲