AUD/USD weekly outlook: June 17th 2024

The Australian dollar rose against all FX majors except the Swiss Franc and New Zealand dollar. Although it handed back much of the gains earned earlier in the week and is lower against most currencies for the  month of June. Ultimately, price on AUD/USD remained choppy last week and trapped between 0.6575 and 0.6700. 

It is not the busiest of calendars for AUD/USD traders next week. And whilst the RBA cash rate ‘decision’ is the standout domestic event, I doubt it will be much of an event. The 4.35% cash rate seems very likely to stay for the rest of the year, with pockets of weakness in the economy in some areas (growth) being matched with areas of strength in others (inflation, employment). So apart from some minor tweaks to the statements, I expect no RBNZ-style curveballs from the RBA. As a refresher, RBNZ surprised most by discussing a potential hike at their last meeting, when markets were positioned for a subtle hint of easing some time this year.

As of Friday’s close, the RBA 30-day cash rate futures implied just a 5% chance of a 25bp cut, and a fully priced cut lands in July 2025.

Flash PMIs across APAC, Europe and the US warrant a look at the end of the week to assess growth expectations and underlying inflation pressures for the RBA and Fed to contend with.

AUD/USD 20-day rolling correlation

• There has been a notable drop in the 20-day positive correlation between gold, copper and the Australian dollar over the past week
• The inverted correlation between the US dollar index and AUD/USD was also a touch lower, after falling from a strong level of -0.96 a few weeks ago
• However, yield differentials are trying to make a come back with the AU-US 2-year yield doubling from 0.2 to 0.4 over the past week
• Whilst this is not yet a strong correlation, it seems to be trying to move towards one

AUD/USD futures – market positioning from the COT report:

• Net-short exposure to AUD/USD futures increased for a second week among large speculators and asset managers last week
• Both sets of traders increased shorts and trimmed longs
• Total open interest was also higher for a second week, which implies bearish pressure was building for AUD/USD

AUD/USD technical analysis

The high-to-low span of last week was around 2%, yet AUD/USD only manage to rise 0.5% by the week’s close. Price action remain choppy and challenging for traders on the daily timeframe or higher. This makes it better suited for intraday traders, or those seeking to trade the range by entering around the lows, exiting near highs or potentially fade into the for a move lower. It is not a glamorous way of trading, but for now we have clear levels AUD/USD is holding around.

• Support clusters ~0.6580 (100, 200-day EMAs, 38.2% Fibonacci level)
• Resistance cluster ~0.680 – 0.6700 (upper 1-week implied volatility band, 67c handle)

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge