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Australian Dollar overwhelmed by near term headwinds

Thursday 1 July, 2021

Daily Currency Update

AUD - Australian DollarThe Australian dollar slipped below 0.75 US cents Wednesday, amid a deluge of offshore macroeconomic data sets and a broadly stronger USD. Having tracked sideways for much of the domestic session, bouncing between 0.7510 and 0.7525, the AUD was forced to intraday lows at 0.7494 overnight. A stronger than anticipated ADP private payroll print helped consolidate expectations Friday’s non-farm payroll and labour market report will present a strong showing. With the market fixated on labour market performance and US monetary policy, the AUD remains vulnerable in the near term, with an extended break below 0.75 a reality. Despite sustained strength across commodity prices, we expect the AUD will face further near-term pressures leading into Friday with supports at 0.7480 at risk. Our attention remains affixed to US labour market data with a print above consensus (700,000 new jobs created) opening the door to a USD rally into the weekly close.

Key Movers

Month end flows and broadly stronger demand for the world’s base currency helped the USD track higher through trade on Wednesday. ADP private payroll data outperformed market expectations and while not always a reliable leading indicator of labour market performance was enough to fuel expectations Friday’s non-farm payroll report will present a strong showing and surpass consensus expectations. With other US data sets mixed, investors appeared content in sidelining bigger bets until Friday. Markets are fixated on US monetary policy and while the impact of commentary from Fed policymakers has dissipated through the last 7 days, labour market performance and the speed at which the US economy replaces those jobs lost to the pandemic is critical in shaping policy moving forward. The Japanese yen was one of the worst performers overnight as investors appeared to adjust positions come month-end and correct some of the gains enjoyed through June. The yen fell sharply allowing the USD to push through 111 and touch a 15-month high. The euro and GBP continue to soften with the euro slipping toward 1.1850 and the GBP struggling to hold onto 1.38.

Expected Ranges

  • AUD/USD: 0.7430 - 0.7580 ▼
  • AUD/EUR: 0.6290 - 0.6360 ▲
  • GBP/AUD: 1.8270 - 1.8520 ▲
  • AUD/NZD: 1.0720 - 1.0780 ▼
  • AUD/CAD: 0.9280 - 0.9360 ▼