24th August 2021 - AUD trades above 0.7200, gain 1.15%, despite worse than expected Australia PMI

Market Headlines

US equity markets helped receding expectations of a Fed tapering signal this week, as well as news of more regulatory approvals for Covid vaccines. The S&P500 rose 0.9%, and the defensive US dollar fell, lifting the AUD and NZD, while bond yields fell slightly. US 2yr treasury yields fell from 0.23% to 0.22%, while the 10yr yield fell from 1.28% to 1.25%.

Commodities, Brent crude oil futures rose 5.3% to $69, copper rose 2.1%, and gold rose 1.3%. Iron ore rose 4.2% to $135.

Overnight Currency Range

AUD/USD 0.7120 0.7217

EUR/USD 1.1693 1.1750

GBP/USD 1.3610 1.3731

USD/JPY 109.65 110.14

NZD/USD 0.6820 0.6903

USD/CAD 1.2642 1.2829

USD/CNH 6.4750 6.5000

AUD/JPY 78.01 79.18

AUD/NZD 1.0446 1.0472

AUD Thoughts

The AUD/USD trades back above 0.7211, edging up for a 1.15% gain, ahead of the Jackson Hole Symposium. Australia’s daily coronavirus cases remain near the record top but the latest news on the vaccine and downbeat PMI’s favour the AUD/USD buyers. That said, the we registered another 900+ infections on Monday but New South Wales (NSW), the most infected state, registers the fastest vaccination pace in the world and is keeping the optimists hopeful.

On the same line, the US Food and Drug Administration (FDA) approved Moderna–BioNTech covid vaccine for use over 16 years and above, which in turn offered another weapon to battle the pandemic.

Elsewhere, the preliminary readings of August month’s activity numbers from the US, Europe, the UK and Australia all suggest a bit of softening despite rejecting the contraction. The same helps the US Federal Reserve (Fed) and its friends on the line to reject challenges for their easy-money policies.

Looking forward, a lack of major data/events may keep AUD/USD traders at the mercy of qualitative catalysts for immediate direction. Among them, news on the coronavirus, vaccine and central banks will be the key to follow.

AUD/USD bounces off nine-month low amid oversold RSI conditions, suggesting further recovery towards October 2020 peak surrounding 0.7140-45. However, bulls are less likely to be convinced until witnessing a daily closing beyond July’s low of 0.7288. Alternatively, June 2020 high near 0.7065 can entertain sellers during the pair’s fresh downside.

Event Risk Data Today

New Zealand: Market expects the Q2 real retail sales report to show that spending continued to rise at a robust pace through the quarter, with volumes up 2%. Additionally, prices are expected to take a sizeable step higher on supply disruptions and strong demand.

US: The market expects July new home sales to rise following three consecutive declines, with financial conditions and labour market gains tailwinds for demand (market f/c: 699k). Further, the August Richmond Fed index will offer insight into delta’s varied impact across the nation.

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