The Australian dollar is sliding

Chris Hyde/Getty Images

The Australian dollar weakened overnight, undermined by a rare bout of US dollar strength, a modest pullback in commodity prices and renewed concern from the Reserve Bank of Australia (RBA) over its recent push higher.

Here’s the scoreboard just before 7am AEST.

AUD/USD 0.7967 , -0.0035 , -0.44%
AUD/JPY 87.94 , -0.27 , -0.31%
AUD/CNH 5.3612 , -0.0214 , -0.40%
AUD/EUR 0.6750 , -0.0006 , -0.09%
AUD/GBP 0.6032 , -0.0023 , -0.38%
AUD/NZD 1.0665 , 0.002 , 0.19%
AUD/CAD 0.9991 , 0.0007 , 0.07%

The biggest influence on the Aussie overnight was a rebound in the US dollar, something that came despite broadly weakish US economic data and falling US bond yields.

Given those factors, something that would normally act to pressure the greenback, the move was likely due to technical factors, said Elias Haddad, senior currency strategist at the Commonwealth Bank.

“Judging from soft US inflation pressures, flat real personal consumption spending in June and disappointing manufacturing activity, the modest USD recovery overnight appears to be technically driven,” he said in his Wednesday morning note.

The US dollar index briefly fell to the lowest level since May 3 last year before rebounding following the release of the inflation data.

After sliding 10.5% from January 3 this year, it suggests the move may have been driven by a combination of lopsided short positioning and profit-taking from some investors.

Weakness in iron ore and crude oil, along with renewed concern from the RBA over its recent strength, were also factors that contributed to the Aussie’s modest reversal, seeing it decline by around 80 pips from the highs struck earlier in the session.

AUD/USD Hourly Chart

Turning to Asian trade on Wednesday, there’s little in the way of market-moving events on the economic calendar, hinting that movements across currency markets may be limited as traders await the release of more important data later in the week.

In Australia, markets will receive building approvals figures for June (11.30am AEST) while across the ditch in New Zealand quarterly unemployment data will also be released (8.45am AEST).

Later in the session, the highlights include the ADP National Employment report and ISM New York manufacturing index in the states along with producer price inflation from the eurozone.

Most attention will fall on the ADP report before the release of US non-farm payrolls data for July on Friday. Private sector payrolls are tipped to increase 185,000, an acceleration on the 158,000 gain of June.

It will be released at 10.15pm AEST

Fed members Loretta Mester and John Williams are also scheduled to deliver speeches.

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