Groundhog Day: The Australian dollar has failed to hold above 77 cents, again

PUNXSUTAWNEY, PA – FEBRUARY 2: Groundhog handler John Griffiths holds Punxsutawney Phil. (Photo by Jeff Swensen/Getty Images)

For what seems the umpteenth time in the past few months, the Australian dollar has failed to break convincingly above the 77 cent level, sliding lower against the US dollar on Friday evening despite yet another decline in US bond yields.

Here’s the early scoreboard as at 7.50am AEDT:

  • AUD/USD 0.7671 , 0.0002 , 0.03%
  • AUD/JPY 85.99 , -0.06 , -0.07%
  • AUD/CNH 5.2569 , 0.001 , 0.02%
  • AUD/EUR 0.7257 , -0.0003 , -0.04%
  • AUD/GBP 0.6147 , -0.0004 , -0.07%
  • AUD/NZD 1.0648 , -0.0006 , -0.06%

And here’s the AUD/USD daily chart showing the multitude of failures above the 77 cent level in recent months.

AUD/USD Daily Chart

Despite the Aussie’s less than stellar track record above this level, Ray Attrill, global co-head of FX strategy at the National Australia Bank, doesn’t expect the weakness seen on Friday evening to extend into Monday’s trading session.

“AUD/USD shouldn’t come to much if any harm at the start of the week, with the USD at risk of some further long liquidation with treasury yields back at the bottom of their 2.30-2.60% 10-year range,” he says.

In particular, Attrill says that Donald Trump’s address to the US Congress on Tuesday may disappoint investors who are looking for more concrete budget details from the newly-elected president.

“Trump’s address to Congress Tuesday is the key early-week swing factor, but with a formal announcement of his budgetary ambitions not likely before March 14th, chances are it will be long on rhetoric, short on detail,” Attrill says.

Before that event arrives, attention today will likely fall on the latest batch of Australian Q4 GDP inputs with business inventories and gross company profits data for the December quarter.

Markets expect inventories to lift by 0.5% with company profits expected to soar by 8%, courtesy of booming commodity prices for miners.

While most economists expect inventories to lift — adding to real GDP — Westpac expects a small decline for the quarter, potentially laying the groundwork for a far smaller bounce in economic growth following the shock 0.5% contraction in the September quarter.

“We expect destocking in the retail and wholesale sectors to contribute to a 0.1% decline in total inventories,” says Imre Speizer, senior market strategist at Westpac.

“That implies inventories will subtract 0.3 percentage points from Q4 GDP growth.

“This is a key judgement contributing to our below consensus Q4 GDP growth forecast of 0.4% for the quarter,” he says.

Both reports will be released at 11.30am AEDT.

Outside of the Australian GDP inputs, there’s very little on the economic calendar in Asia, suggesting that movements in US bond yields, the USD/JPY and Chinese commodity futures will likely prove influential on the Aussie.

Later in the session, markets will also receive pending home sales, Dallas Fed manufacturing index, durable goods orders and revised building approvals figures from the US along with eurozone consumer confidence.

The US data releases, in particular, carry the potential to create short-term volatility in currency markets, including in the Aussie.

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