27th April 2021 - AUD/USD seesaws near 0.7800 after the heaviest run-up in two weeks

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Market Headlines

US equities remained elevated, on track for a fresh closing record high, helped by expectations of an accommodative Fed statement this week. The S&P500 is currently up 0.3%, and risk-sensitive currencies are higher. Bond yields were little change though. US 2yr treasury yields rose from 0.16% to 0.17%, while the 10yr yield ranged between 1.55% and 1.60%. Commodities, Brent crude oil futures fell 0.5% to $65.75, copper rose 2.4% to a ten-year high, and gold rose 0.2%, while iron ore rose 3.5% to $191.60.

Overnight Currency Ranges

AUD/USD 0.7735 0.7815

EUR/USD 1.2061 1.2117

GBP/USD 1.3867 1.3929

USD/JPY 107.65 108.19

NZD/USD 0.7191 0.7243

USD/CAD 1.2384 1.2488

USD/CNH 6.4706 6.4913

AUD/JPY 83.50 84.50

AUD/NZD 1.0769 1.0800

AUD Thoughts

AUD/USD seesaws near 0.7800 after the heaviest run-up in two weeks

Having posted the biggest daily gains since mid-April, not to forget testing the monthly peak, AUD/USD bulls catch a breather in a 10-pip trading range around 0.7800 during the early Asian session on Tuesday. Although Aussie markets were off on Monday and the economic calendar was light as well, strong copper prices and hopes of a speedy exit from the coronavirus (COVID-19) pandemic, due to faster vaccinations, favoured the bulls the previous day.

Charging up for Aussie CPI, Fed…

The return of Australian traders after the ANZAC Day off seems to witness a cautious mood ahead of the week’s key events, namely Wednesday’s Q1 Consumer Price Index for Australia and the Fed’s monetary policy meeting. Although the Aussie CPI will be weighed over the RBA’s cautious optimism, the Federal Reserve decision may ignore the Bank of Canada’s (BOC) out-of-the-box move while backing continuous monetary stimulus for further economic recovery. It’s worth mentioning the currency major benefited from the strong commodity prices, particularly copper’s rally to a fresh 10-year high. Weaker US dollar and hopes of faster vaccinations also backed the AUD/USD bulls even as India’s covid conditions and the global tussle with China test further upside.

A point to note is that the latest challenges to US President Joe Biden’s infrastructure spending, on the back of fresh census numbers and the industry dislike for tax hike proposal, offer an extra test for the markets. Against this backdrop, Wall Street closed mixed while the US 10-year Treasury yield remains unchanged around 1.57%. Further, the US dollar index (DXY) stays pressured near the lowest levels since early March.

Looking forward, the Australian economic calendar is empty and hence risk catalysts, as well as commodity price moves, will be the key to follow for fresh impetus.

The AUD/USD made highs of 0.7815 overnight with immediate offering interest is expected between 0.7820/30 and again ahead of 0.7900 while demand has likely followed spot higher and should materialise if we drift back to 0.7750.

Event Risk Data Today

China: March industrial profits will be supported by strong demand, which will facilitate margin expansion and cost passthrough.

US: Both the February FHFA house price index (market f/c: 1.0%) and the S&P/CS home price index (market f/c: 1.1%) are set for further increases on rising incomes and low rates. Consumer confidence has been a laggard, but has shown improvement ahead of the March update (market f/c: 112.5). The Richmond Fed Index should lift to 22; regional surveys have been very positive of late.

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