US equities shrugged off early losses, the S&P500 currently up 0.3% on the day. The improved sentiment weighed on the defensive US dollar.US 2yr treasury yields ranged between 0.49% and 0.51% while the 10yr yield ranged between 1.57% and 1.61%. A 10yr inflation-linked bond auction saw strong demand. Markets continue to fully price the first Fed funds rate hike to be in August 2022. Australian 3yr government bond yields (futures) traded around 1.13%, while the 10yr yield rose from 1.80% to 1.84%. Markets continue to fully price the first RBA rate hike to be in July 2022.
Commodities, Brent crude oil futures rose 1.0% to $81, copper rose 1.1%, gold fell 0.4%, and iron ore fell 3.1% to $87 – an 18-month low.
Overnight Currency Range
AUD/USD 0.7250 0.7292
EUR/USD 1.1344 1.1375
GBP/USD 1.3464 1.3514
USD/JPY 113.89 114.47
NZD/USD 0.6994 0.7052
USD/CAD 1.2594 1.2647
USD/CNH 6.3731 6.3901
AUD/JPY 82.65 83.26
AUD/NZD 1.0320 1.0387
AUD/USD has rebounded slightly on Thursday after hitting six-week lows on Wednesday just above 0.7250. Profit-taking on recent shorts, positive reopening news and NZD strength are all likely helping.
The pair’s near-term technical bias continues to look bearish and rallies above 0.7300 remain subject to being sold. Technical buying followings it's run of recent losses, as well some positive Australian economic reopening headlines, have helped AUD/USD post a decent rebound thus far this Thursday. The pair hit six-week lows just above 0.7250 late on Wednesday but has since recovered back to the 0.7280s. That means AUD is currently trading with gains of about 0.2% on the day versus the US dollar. The premier of Victoria announced on Thursday that most Covid-19 related restrictions would be lifted from midnight. Over the last few weeks, restrictions, which were the toughest in Australia’s most populous states New South Wales and Victoria, have been eased. This is expected to provide the economy with a boost in Q4.
AUD/USD may also be getting a boost from strength in its antipodean cousin the kiwi. NZD is the best performing G10 currency on the day, up 0.6% versus the buck, after a quarterly survey of business managers one-year inflation expectations rose to an 11-year high at 3.7% from 3.02% in Q3. Traders said the data boosts the odds that the RBNZ opts to go with a 50bps rate hike at its policy meeting next week. AUD and NZD are typically closely correlated.
But zooming out to look at AUD/USD’s short/medium-term prospects, the technicals continue to look bearish. AUD/USD has been falling within a descending trend channel since the end of October. At the start of the week, the pair tested and rejected resistance in the form of the top of the descending trend channel. Any recovery back to the north of the 0.7300 level remains subject to being sold. To the downside, bears will be targeting the September lows just under 0.7200.
AUD/USD seeing choppy price action as it managed to recover from 0.7250 lows. Expect further bids in that region down to 0.7220. Offering from 0.7380 and then again nearer 0.7420.
Event Risk Data Today
Japan: The CPI should remain weak in October despite global inflationary pressures (market f/c: 0.2%).
UK: GfK consumer sentiment for November will be hurt by rising prices and ongoing delta concerns, but should remain well above the lows of 2020. October’s retail sales growth is expected to modest given strengthening demand for services at the expense of goods (market f/c: 0.5%).
US: The FOMC’s Clarida will speak on global monetary policy coordination; Waller will discuss the economic outlook.