19th July 2021 - AUD/USD bears on top for the open

Market Headlines

A risk-averse mood again weighed on major asset classes. Surveyed inflation expectations in the US rose further. The S&P500 closed down 0.8%, and bond yields and risk-sensitive currencies fell slightly. US 2yr treasury yields fell from 0.24% to 0.22%, while the 10yr yield fell from 1.33% to 1.29%. Commodities, Brent crude oil futures rose 0.2% to $74, copper fell 0.1%, and gold fell 1.0%. Iron ore fell 0.5% to $218.

Overnight Currency Ranges

AUD/USD 0.7392 0.7441 - the lowest since December 2020

EUR/USD 1.1792 1.1822

GBP/USD 1.3760 1.3861

USD/JPY 109.73 110.34

NZD/USD 0.6985 0.7050

USD/CAD 1.2562 1.2621

USD/CNH 6.4634 6.4830

AUD/JPY 81.33 81.94

AUD/NZD 1.0561 1.0639 - the lowest since February 2021

AUD Thoughts

COVID spread weighing on market's risk appetite, on Friday, AUD/USD ended down 0.35% falling from a high of 0.7442 and fell to a low of 0.7392, (a fresh 2021 low), extending its monthly decline from the 0.7800 area.

Meanwhile, solid US data and a shift in interest rate expectations after the Federal Reserve flagged in June sooner-than-expected hikes in 2023 have put a floor under the greenback. The dollar index DXY, which measures the greenback against a basket of six currencies, was ending 0.16% higher at 92.712. The index is up 0.6% for the week. The gains came despite Fed Chair Jerome Powell reiterating on Thursday that rising inflation was likely to be transitory and that the US central bank would continue to support the economy.

It is a quiet week on the calendar, apart from what would be expected to be dovish minutes from the very dovish July Reserve Bank of Australia meeting. Therefore, external factors would be expected to be in play.

Combining the risk-off mood pertaining to the spread of the delta variant from the weekend and the fact that AUD/USD failed to break above 0.7500 earlier this week, even when global sentiment appeared favourable, the bias is firmly bearish. Moreover, yet another five-day lockdown in the state of Victoria was recently imposed and the latest headlines suggest it could be extended.

The AUD/USD should find support at 0.7380 on its first attempt while supply remains thick and staggered towards 0.7600.

Event Risk Data Today

New Zealand: Risks will be to the upside in the June Business NZ PSI, continuing the trend of strong data.

US: The July NAHB housing market index will reveal that conditions are robust in the homebuilding sector(market f/c: 82); however, supply constraints are serving as a headwind.

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