AUD: A$ Outperforms On Commodity Rebound
AUD/USD spent much of the post-Asia close on the front foot. We got to the 0.6850 level on a couple of occasions but couldn't breach higher. We currently track slightly lower at 0.6845.
- The currency led all-comers in the G10 FX space over the past 24 hours, up close to 0.9%, slightly shading the GBP bounce. AUD outperformed EUR, CHF and JPY.
- The rebound in commodities was in focus, with copper surging nearly 5%, while aggregate base metals rose 2.3%. Iron ore got to as high as $115.50/tonne before easing. This followed on from yesterday's record trade surplus data for May, which was boosted by commodity prices.
- Renewed optimism around China stimulus boosted commodities, after yesterday's announcement China was considering bringing forward local government bond issuance slated for 2023 to this year (1.5 trln in yuan terms or $220bn).
- Equity sentiment was also positive in US markets, with the VIX dipping sub 26, before closing just above this level. US equities have risen for 4 straight sessions, as Fed officials try to play down recession risks. AUD/JPY is back above 93.00, versus early lows from yesterday of below 92.00.
- US yields generally remained on the front foot, as hawkish Fed rhetoric continued. AU-US spreads remained depressed on a 2yr tenor, but have seen more stability on a 10yr basis this week.
- There is no Australian data today, but the Australian and China Foreign Ministers are scheduled to meet today on the sidelines of the G20 Foreign Ministers meeting in Bali. This would be the first meeting between the two ministers since September 2019.
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AUSSIE 10-YEAR TECHS: (M2) Edges Off Recent Highs
- RES 3: 97.455 - High Mar 18
- RES 2: 97.185 - High Apr 5
- RES 1: 96.945 - High Apr 26 and key short-term resistance
- PRICE: 96.485 @ 15:27 BST Jun 07
- SUP 1: 96.330 - Low May 10
- SUP 2: 96.200 - 3.0% Lower Bollinger Band
- SUP 3: 96.124 - 0.5% 10-dma envelope
Aussie 10yr futures are drifting away from recent highs. This keeps the primary trend pointed down. MA studies continue to highlight a bearish backdrop and recent weakness has maintained a bearish price sequence of lower lows and lower highs - the definition of a downtrend. A resumption of weakness would open 96.200 - the 3.0% lower Bollinger Band as well as 96.124. Key short-term resistance remains at 96.945, the Apr 26 high.
AUD: A$ Rebounds, AUD/JPY Back to 96.00
AUD/USD dipped just below 0.7160 post the Asia close but rebounded strongly thereafter. We got back close to post RBA highs of 0.7240, before settling at 0.7230/35, which is where we currently sit.
- To recap, US equities finished higher, albeit in a volatile session. The VIX index though declined to fresh lows of 24%, levels last seen in late April.
- US yields eased off recent highs, with no obvious catalyst. This should see yield differentials stay in favor of the AUD today, following yesterday's larger than expected RBA rate rise.
- AUD is the best performing currency in the past 24 hours. AUD/JPY dipped back to 95.00 after the RBA, but rallied back to 96.00. We open this morning just above 95.90.
- Commodities were mixed, iron ore holding close to recent highs, while Brent crude dips sub $120/bbl were supported. Base metals slid though, the Bloomberg index losing 0.6%, reversing part of Monday's1.48% gain.
- There is no major data released today.
- From a technical standpoint, AUDUSD remains above 0.7139, the 20-day EMA. S/T conditions are bullish. The pair has traded above both the 20- and 50-day EMAs. This strengthens current conditions and signal scope for a climb towards 0.7343, a Fibonacci retracement.
AUSSIE 3-YEAR TECHS: (M2) Corrective Cycle Still In Play
- RES 3: 98.350 - High Mar 3
- RES 2: 97.975 - High Mar 16
- RES 1: 97.530 - High Mar 31
- PRICE: 96.860 @ 15:27 BST Jun 07
- SUP 1: 96.675 - Low May 4 and the bear trigger
- SUP 2: 96.612 - 3.0% Lower Bollinger Band
- SUP 3: 96.570- 0.5% 10-dma envelope
The primary trend direction in Aussie 3yr futures remains down and prices have begun to drift back toward levels last seen at the beginning of May. A primary bearish price sequence of lower lows and lower highs remains intact and moving average studies point south. A resumption of weakness would open 96.612 - the 3.0% lower Bollinger Band as well as 96.570, the lower band of a moving average envelope. Key short-term resistance is at 97.530, the Mar 31 high.
