Big week ahead for the AUD

The AUD has gotten off to a choppy start to what looks could be a big week for the local currency. 

After getting off to a mildly positive start on the back of developments from China over the weekend, AUD/USD has since given up some ground and even briefly traded below 0.93. It was refreshing to see the manufacturing PMI reading bounce to a five-month high of 50.8 and better than an expected 50.7. On Friday there was also an announcement that China will cut the reserve requirement for some banks - mainly to rural borrowers and small companies. This is yet another sign that China is doing what it can to improve sentiment.

Locally we’ve had a raft of releases this morning, including company operating profits which came in at a better-than-expected +3.1%, while building approvals surprised with a 5.6% drop. Local data just continues to give mixed signals, but perhaps this week will offer some insight into what we can expect going forward. Tomorrow we have the RBA meeting which isn’t expected to bring a rate change. However, the statement might offer some precious insight into the RBA’s budget opinion for the first time. Many analysts feel the tight budget will keep the RBA on hold for longer, or better yet a rate cut at some point.

Ranges set to be tested

AUD/USD is now trading at 0.928 after being offered in the 0.93 region. Last week the pair tested lows closer to 0.92, and we could see some support there if this level is tested in the near term. To the upside, a break of last week’s high of 0.933 could signal further near-term strength. It’s a tough call to pick a direction for the AUD this week given the significant event risk on the way. As a result I would be more inclined to play the ranges and react to any breaks lower of higher. We also can’t forget there will be plenty of activity on the USD side of the equation, with non-farm payrolls on the docket.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.