FOREX: A$ Backs Away From 0.7100 Test, BBDXY Struggles Amidst Yen Gains

The main focus in the G10 space has been a further retracement in USD/JPY, although higher beta FX has given some of the recent gains seen. AUD and NZD are both down 0.25-0.30%. Some retracement in the precious metals rally has likely been a headwind for both currencies. Gold is down around 0.65%, while silver is off a little over 2.5%. AUD/USD has stopped short of a test above 0.7100, with an option expiry at this figure level for NY cut later as well. AUD/USD was last 0.7070/75, NZD/USD in the 0.6035/40 region. The BBDXY index did try to rally in first part of trade but once USD/JPY rolled over it struggled. We were last 1182.6 for the index, little changed for the session (earlier highs were at 1184.46). 

• On the data front, the main focus has been on Australian survey measures with both the Westpac consumer sentiment and NAB business surveys released. Consumer sentiment fell, although Westpac noted the response was more muted compared to earlier rate hikes. NAB business conditions eased, but have largely trended sideways since the middle of last year.
• Both measures point to some downside risks to growth momentum, but the RBA arguably needs this help bring inflation back into the target band.
• US equity futures are a touch softer, while US yields are drifting lower (which has likely help cap USD upside). AUD/JPY is back under 110.00, but still above all key EMAs.
• There have been little shifts elsewhere, outside of some weakness in NOK and SEK. EUR/USD has hovered just above 1.1900, while GBP/USD remains sub 1.3700, which capped upside late in Monday trade.
• Looking ahead, US retail sales data headlines Tuesday’s calendar, while markets will then swiftly turn their focus to US employment (Wed) and US CPI (Fri).