After briefly coming under renewed selling pressure on Friday, the Australian dollar got back to doing what it does best at present — move higher — surging to a fresh one-month high against the US dollar in overnight trade.
The AUD/USD rose to as high as .7572 shortly after the resumption of trade in US stocks, hitting highs not seen since July 15. It eventually finished the session buying .7650 — off the highs but still up 0.41% from Friday’s closing level.
It is currently trading at .7651 in early Asian trade on Tuesday. Markets will be paying close attention to the high of .7577 struck on July 15 on Tuesday, with a break above this levels potentially leading to further gains ahead.
Richard Grace, chief currency strategist at the Commonwealth Bank, notes that there were a variety of factors that supported the Aussie in overnight trade.
“Higher commodity prices, tighter credit spreads and a lift in Asian and European equity markets appear the catalyst for AUD to out-perform on all the major crosses in overnight trade,” wrote Grace in his morning note.
As the 5-minute chart below reveals, the two big moves in the Aussie both coincided with the opening of European and US stocks. This provides some indication on the true fundamentals underpinning the rally.
In the commodity space, something that the Aussie understandably has a strong relationship with, crude oil spiked more than 3% — inspired by yet another timely meeting announcement from OPEC after another steep price slide — while Chinese iron ore and coking coal futures ripped higher, closing at fresh multi-year highs.
These factors no doubt assisted the Aussie’s ascent.
Turning to Tuesday trade in Asia, market attention – outside of movement in commodity futures — will be on the release of the NAB’s Australian business confidence survey and CPI and PPI figures from China.
“In June, the NAB survey was carried out during the uncertainty around the Brexit referendum and ahead of the Australian federal election,” said Rodrigo Catril, currency strategist at the NAB.
“Overall the results from the survey pointed to further improvements in the non-mining economy in Q2 with growth potentially becoming more broad-based – albeit with mixed evidence.
“As such it will be interesting to see to what extent, if any, this narrative has changed at all in July,” he adds.
On the Chinese inflation data, markets expect the year-on-year CPI to slow to 1.8% in July, down from 1.9% in June, while producer price deflation is tipped to ease to 2%, an improvement on the 2.6% level seen previously.
Both releases will hit the screens at 11.30am AEST.
There will also be a plethora of second-tier data released in the European and US sessions although none is expected to be overly market moving.
Here’s the Aussie dollar scoreboard, as at 7.55am AEST.
- AUD/USD 0.7651 , 0.0001 , 0.01%
- AUD/JPY 78.38 , 0.02 , 0.03%
- AUD/CNH 5.1007 , -0.0001 , 0.00%
- AUD/EUR 0.6901 , 0.0006 , 0.09%
- AUD/GBP 0.5865 , -0.0001 , -0.02%
- AUD/NZD 1.0696 , -0.0017 , -0.16%