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AUD gives up approach to 0.74 amid cautious start to week

Tuesday 17 August, 2021

Daily Currency Update

Markets adopted a cautious approach through Monday forcing equities, commodities, commodity currencies and risk assets lower. Softer than anticipated Chinese industrial production and retail sales, coupled with a downturn in fixed asset investment and an uptick in the unemployment rate fostered new concerns the prolific Delta strain could derail the Chinese economic recovery. The AUD fell steadily throughout the domestic session giving up 0.7375 early to test intraday day lows at 0.7320 before tracking sideways overnight. Broader concerns surrounding the spread of COVID-19 and the Delta strain have forced markets to sideline reflation hopes and driven the AUD into a narrow trading range. With supply chain blockages expected to worsen as Southeast Asia battles to maintain production under the growing weight of new infections and Australia itself struggling to squash its own outbreak then we see little upside for the AUD through the near term. Resistance on moves approaching 0.74 appear hard to breach while support above the July low remains intact for now. We expect the AUD will remain largely range bound through the near term as markets maintain a cautious approach, sidelining big bets. We anticipate risk will continue to be skewed to the downside until a brighter pandemic outlook is available. Our attentions now turn to Thursday labour market drop, the first full look at the impacts of the Greater Sydney Lockdown.

Key Movers

The US dollar tracked higher through trade on Monday, buoyed by a decline in risk demand. Markets adoption of a cautious approach helped fuel an uptick across haven assets allowing the USD to extend gains against most major counterparts. With copper and oil prices sliding between one and one and a half percent the dollar advanced against commodity lead units while forcing the Euro back below 1.18 and the GBP below 1.3850. Growing concerns surrounding the spread of COVID 19 and rising geo-political tensions, sparked by the Taliban’s shockingly swift reprisal have power have combined to douse demand for risk assets and helped prop up the dollar leading into today’s core retail sales data and Thursday FOMC meeting minutes. We expect markets will continue to adopt a wary approach, narrowing price action in the absence of a new catalyst for direction.

Expected Ranges

  • AUD/USD: 0.7280 - 0.7400 ▼
  • AUD/EUR: 0.6190 - 0.6250 ▼
  • GBP/AUD: 1.8780 - 1.9020 ▲
  • AUD/NZD: 1.0390 - 1.0520 ▼
  • AUD/CAD: 0.9180 - 0.9250 ▼