Near the end of March, I highlighted the strong positive seasonal trend in the Australian dollar and it's certainly backed that up on Day 1 of the new
Near the end of March, I highlighted the strong positive seasonal trend in the Australian dollar and it’s certainly backed that up on Day 1 of the new month.
AUD/USD is up 93 points to 0.6778, though it’s stalled out in the past three hours as the risk trade bounces around.
AUDUSD daily
Technically, you would like to see a close above 0.6783, which is just above spot. that was the March high and would imply a rejection of the break lower.
What worries me that we won’t see upside follow through is the curious drop in US Treasury yields today. That move is weighing on the US dollar and I see it as driven by flows rather than fundamentals.
The big event on the other side of the trade is the RBA decision at 0030 GMT. The consensus is for no change from the 3.60% cash target but the market is implying a 13% chance of a surprise hike. That means the potential for far more upside than downside around the central bank decision.
In the bigger picture, AUD will benefit from better global growth and that trade should continue to perform well as bank worries fade and central banks slow (or stop) rate hikes. China is a major wild card as it continue to reopen from covid. Today’s China manufacturing PMI was a disappointment at 50.0 from 51.6 previously and on Thursday we get the Caixin services PMI.
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