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AUD – Australian Dollar
In the context of recent volatility, the Australian dollar remained relatively range bound through trade on Monday, bouncing between support at 0.6520 and resistance at 0.6550. Markets remained largely muted to start the week as both the US and UK enjoyed extended weekends, while headline newsflows were, in the whole, absent. The AUD appeared vulnerable following the escalation of protests in Hong Kong through the end of last week and as protests continued through the weekend, investors prepared risk off moves ahead of updates from China’s Foreign Ministry Commissioner in Hong Kong. Xie Feng announced the changing security laws will not interfere with the one country, two systems policy, confirming Hong Kong will maintain its legal and judicial powers. While there are still a lot of unanswered questions the statement was enough to assuage investor fears.
The Australian Dollar has enjoyed a sustained run above 0.65 US cents, buoyed by improving optimism and the opening of the global economy. Having temporarily pushed through 0.66 on Thursday last week the currency has slipped back below resistance at 0.655/0.6570. Risk continues to dominate direction as the prospect of a second wave in Coronavirus infections still looms large. With economies beginning to build momentum a second shut down would all but extinguish hopes of a H2 recovery.
Watch resistance on moves approaching 0.66 with short to medium term forecasts biased to the downside.
Price action remained muted through trade on Monday as the US and UK enjoyed long weekends. With volumes low and liquidity thin investors chose to sit on the sidelines through much of the day, squaring positions ahead of what promises to be a busy week ahead for policymakers, especially within the EU. The Euro steadied near 1.09, bouncing between 1.0870 and 1.0910 as markets eagerly await further detail surrounding the EU recovery fund. France and Germany are set to put forth their 500 billion Euro proposal to the EU commission on Wednesday with resistance from Northern States expected to hamper negotiations. Austria, Denmark, The Netherlands and Sweden are pushing for a loan-based system, balking at the idea of issuing grants to those economies hit hardest by the pandemic. Arguments surrounding joint debt obligations have intensified in recent weeks dividing Europe and threatening the longevity of the common currency. We expect the Franco-German proposal will not obtain majority approval with leaders forced back to the drawing board and the Euro pushed back toward 1.08/1.0750. A surprise approval will be Euro positive and could see the common unit test highs above 1.10.
AUD/USD: 0.6380 – 0.6620 ▼
AUD/EUR: 0.5920 – 0.6050 ▲
GBP/AUD: 1.8480 – 1.8720 ▼
AUD/NZD: 1.0680 – 1.0780 ▲
AUD/CAD: 0.9080 – 0.9220 ▼
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