The Australian dollar is grinding higher again

Photo by David McNew/Getty Images

The Australian dollar has opened the new trading week above the 79 US cent level, consolidating upon the gains achieved in the second half of Friday’s trading session.

Here’s the scoreboard as at 7.45am AEST.

AUD/USD 0.7930 , -0.0003 , -0.04%
AUD/JPY 86.61 , -0.09 , -0.10%
AUD/CNH 5.2673 , -0.0007 , -0.01%
AUD/EUR 0.6638 , -0.0012 , -0.18%
AUD/GBP 0.6142 , -0.0003 , -0.05%
AUD/NZD 1.0950 , -0.0004 , -0.04%
AUD/CAD 0.9893 , -0.0012 , -0.12%

Having fallen to as low as .7882 earlier in the session, the AUD/USD rallied to as high as .7953 before eventually closing the week buying .7927.

The rebound in the Aussie was driven by broad-based US dollar weakness following key speeches from US Federal Reserve chair Janet Yellen and ECP president Mario Draghi at the Jackson Hole Economic Symposium during the second half of Friday’s session.

However, as Joseph Capurso, senior currency strategist at the Commonwealth Bank explains, the moves across currency markets were driven by what Yellen and Draghi didn’t say, rather than what they did, when it came to the outlook for monetary policy.

“Yellen said that ‘substantial progress’ has been made toward the Fed’s economic objectives of maximum employment and price stability, but her comments suggest the Fed is closer to the end than the beginning of their tightening cycle,” Capurso wrote in his morning note.

“Draghi did not mention the EUR’s recent appreciation in contrast to the expectations of some market participants that Draghi would talk down the EUR.”

With Yellen and Draghi offering nothing new on the monetary policy front, nor delivering specific commentary over recent moves across currency markets, traders took that as a signal to sell the USD against the Euro, sending the EUR/USD to as high as 1.1940, the loftiest level since January 2015.

That acted to weaken the US dollar, helping the AUD/USD lift back above the .7900 level during the session.

AUD/USD Hourly Chart

After logging its smallest percentage trading range since late December 2014 last week, the AUD/USD looks set to endure another quiet session on Monday.

There’s nothing on the economic calendar both in Australia and across Asia, likely ensuring that investor sentiment, headlines relating to US tax reform and geopolitics on the Korean peninsula, along with movements in Chinese commodity futures, will dictate how the Aussie will perform during the session.

It’s also a quiet data session in Europe with only a smattering of second-tier releases for traders to digest.

In the US, the advanced goods trade balance for July, along with the Dallas Fed manufacturing index for August, will also be released, although those too appear unlikely to deliver a significant move across financial markets.

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