The Australian dollar is still grinding higher

SEBASTIAN WILLNOW / AFP / Getty Images
  • The Australian dollar edged higher on Friday, continuing to benefit from a softer-than-expected US consumer price inflation report for April released on Thursday.
  • Data released on Friday revealed short US dollar positions held by traders continued to evaporate last week, hinting that the tailwinds for the greenback from short covering may be coming to an end.
  • No major economic data is scheduled for release on Monday.

The Australian dollar edged higher on Friday, continuing to benefit from a softer-than-expected US consumer price inflation report for April released a session earlier.

Here’s the scoreboard as at 7.50am AEST.

AUD/USD 0.7544 , 0.0002 , 0.03%
AUD/JPY 82.46 , -0.01 , -0.01%
AUD/CNH 4.7776 , 0.0024 , 0.05%
AUD/EUR 0.6314 , 0.0003 , 0.05%
AUD/GBP 0.5569 , 0.0001 , 0.02%
AUD/NZD 1.0831 , 0.0009 , 0.08%
AUD/CAD 0.9649 , -0.0004 , -0.04%

And here’s the AUD/USD hourly chart showing the price action seen over the past few weeks.

AUD/USD Hourly Chart

Ray Attrill, Head of FX Strategy at the National Australia Bank, said the prevailing theme of Friday’s session was yet again modest weakness in the greenback, driven in part by signs that short covering in the US dollar may have run its course.

“The US dollar index (DXY) was down 0.1% on Friday and unchanged on the week,” he said in his Monday morning report.

“Friday‚Äôs latest CFTC/IMM data on futures positioning showed that net speculative short positions in the USD against other currencies are now barely a third of what they were at their recent peak, suggesting that the USD no longer has the tailwind from position unwinding that was almost certainly a factor behind recent strengthening.”

Attrill said this helped to boost major currencies against the greenback, including the Australian dollar.

“Most currencies were slightly higher against the dollar,” he said. “The exception was the Canadian dollar which suffered on a weaker-than-expected employment reading [for April].”

The Aussie showed little reaction to the release of Chinese monetary growth data for April released in the second half of the session which revealed new bank loans and aggregate social financing both increased modestly on the levels reported in March.

M2 money supply growth was the exception to the broader rule, lifting by 8.3% year-on-year from 8.2% in March, below the 8.5% level expected.

Turning to the session ahead, there’s next to nothing on the economic events calendar that will be of interest to traders.

There’s no major data released in Australia or abroad meaning sentiment, technicals and tweaks to positioning ahead of major economic data out later in the week will likely dictate direction today.

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