The Australian dollar is under pressure

Marty Melville/AFP/Getty Images

The Australian dollar has opened the new trading week below the 75 cent level, weighed down by weakness in commodity prices and continued US dollar strength.

As at 7.35am AEST, the AUD/USD buys .7461, unchanged from last week’s close. At one point on Friday the AUD/USD fell to as low as .7440, a low not seen since early July. From the high of July 15, it took the decline in the Aussie to more than 3%.

AUD/USD Hourly Chart

Broad-based US dollar strength was a major factor behind the Aussie’s slide with the US dollar index racing to a four-month high on Friday, boosted by weakness in the euro and UK pound before the US Federal Reserve’s FOMC July monetary policy decision that will arrive on Thursday morning (AEST) this week.

Jospeh Capurso, senior currency strategist at the Commonwealth Bank, believes this trend will continue in the days ahead.

“We expect the USD to firm further after the Federal Reserve‚Äôs regular policy meeting Thursday,” says Capurso.

“We expect the Fed to keep policy on hold but be more optimistic about the US economic outlook given the limited fall-out from Brexit and improvement in the US economic data.”

Given the expectation for further US dollar strength, Capurso suggests that the Australian dollar will remain under pressure this week.

“AUD/USD will grind lower because of a recovery in the USD and if a weak Q2 underlying CPI (0.4% or less) lifts the pricing for a RBA rate cut next week,” he says. “Weak growth in wages, low inflation expectations, and some spare capacity in the labour market is bearing down on inflation.”

Looking ahead to Monday’s trading session, there is yet again next to nothing that has the potential to generate volatility in the Aussie.

Japanese trade data for June will be released at 9.50am AEST but its unlikely to trouble the scorers.

With the data and events calendar quiet, risk assets across the region, including the Australian dollar, will likely be influenced by movements in the Japanese yen, crude oil futures and Chinese financial markets.

Here’s the Aussie dollar scoreboard as at 7.35am AEST.

  • AUD/USD 0.7461 , 0 , 0.00%
  • AUD/JPY 79.2 , 0.10 , 0.13%
  • AUD/CNH 4.9859 , 0.0019 , 0.04%
  • AUD/EUR 0.6798 , 0 , 0.00%
  • AUD/GBP 0.5682 , -0.0001 , -0.02%
  • AUD/NZD 1.0668 , 0.0017 , 0.16%

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