Aussie dollar unable to find support falling below 64 US cents
Monday 10 October, 2022
Daily Currency UpdateThe Australian dollar finished the week weaker trading below 64 US cents on modest USD strength. On Friday the AUD/USD pair fell further below the US$0.6400 mark in reaction to the upbeat US jobs data and move well within the striking distance of the lowest level since April 2020 touched last week. The Australian dollar is weighed down by the Reserve Bank of Australia's (RBA) decision to slow the pace of policy tightening and raise interest rates by 25 bps earlier this week. This, in turn, favours bearish traders and suggests that the path of least resistance for the AUD/USD pair is to the downside. Now trading below the US$0.6400 mark could be seen as a fresh trigger for bearish traders. Hence, a subsequent slide back towards challenging the YTD low, around the US$0.6365 regions, remains a distinct possibility. The downward trajectory could further get extended and make the AUD/USD pair vulnerable to test the next relevant support near the US$0.6300 round figure. The Australian dollar is currently trading at US$0.6364 against the US dollar.
A very quiet week ahead and on Tuesday we will see the release of both the Westpac Consumer Sentiment and NAB Business Confidence. On Wednesday RBA Assistant Governor (Economic) Luci Ellis will speak in Sydney at the Citi Australia & New Zealand Investment Conference. From Tuesday this week, all eyes will be on the International Monetary Fund (IMF) meetings. IMF meetings are usually held twice a year and are attended by the representatives of the IMF and the World Bank. A formal statement covering policy shifts and meeting objectives is released after the meetings have concluded. Both the comments (open to the press) and statements can create market volatility.
Key MoversOn Friday in the United States, the USD Index which measures the greenback's performance against a basket of currencies climbed to the top end of its weekly range amid hawkish Federal Reserve expectations. Investors seem convinced that the US central bank will stick to its aggressive policy tightening path to tame inflation and have been pricing in another supersized 75 bps rate hike in November.
The key focus for the market on Friday was the US employment report which showed that the unemployment rate unexpectedly to 3.5% in September from 3.7% previous. Additional details revealed that the US economy added 263K new jobs during the reported month, beating consensus estimates for a reading of 250K. The data all but reaffirmed expectations with no more payrolls releases before the November FOMC meeting, the market moved to increase the chance of a 75bps hike are now almost fully priced in.
In the week ahead, the US CPI on Thursday night is the key focus, with the market seeing lower gasoline prices weighing on the headline rate (0.2% m/m expected), and core inflation remaining uncomfortably strong, at 0.4% m/m and 6.5% y/y. The US earnings season kicks off later in the week, but it’ll be off to a quiet start with the US public holiday on Tuesday and only a couple of Fed speakers on the calendar.
- AUD/USD: 0.6250 - 0.6450 ▼
- AUD/EUR: 0.6450 - 0.6650 ▼
- GBP/AUD: 1.7300 - 1.7500 ▲
- AUD/NZD: 1.1250 - 1.1450 ▲
- AUD/CAD: 0.8650 - 0.8850 ▲