AUD/USD is currently chipping away to the upside while the greenback was under pressure on Friday in the US session.
Following the disappointing data in US inflation and retail sales, the US 10yr treasury yields fell from 2.38% to 2.32% and remained around there until the close. The dollar got a knock as well from the Fed fund futures yields. Those also fell with the market now only pricing in a June rate hike by an 80% chance from around 90% the previous day.
“Since the Fed’s hike on the Ides of March, the Australian dollar has been the weakest of the major currencies, losing more than 4% against the US dollar,” explained analysts at Brown Brothers Harriman, adding, “even before the disappointing US data, the Australian dollar’s downside momentum had been easing, and some demand emerged around $0.7330. Initial resistance is seen near $0.7430. Several technical consideration converges by $0.7500, which suggests it will be a formidable barrier.”
For today, given that last week’s rebound off 0.7329 has been sustained, so far, analysts at Westpac are suggesting a push beyond 0.7420 is feasible for today. Their longer term outlook, between 1-3 months, is less bullish as follows:
“The modestly weaker than expected Australian CPI outcome has added yet another factor capping the AUD/USD: softer commodity prices; a more protectionist stance from US President Trump, and higher US yields if the Fed raises rates in June as we expect. These leave the AUD/YSD with strong resistance at 0.76. We expect to see it heading towards 0.74 by year end, (26 Apr).”
A key technical and bearish target lies with the base of the range that is offered by the 2016-2017 support line at 0.7294. “This is expected to eventually break down targeting initially 0.7161 December 2016 low then 0.7013 the 2001-2017 support line,” argued analysts at Commerzbank. The wider picture shows that the Aussie is side-lined in a converging range between 0.7294 and 0.7726, and the analysts bias is negative. “Failure will target 0.7161 Dec 2016 low then 0.7013 the 2001 to 2017 support line and eventually the 0.6828 January 2016 low.”