The Australian dollar is under pressure but the CBA doesn't expect that to last

Tim DeFrisco / GettyImages

The Australian dollar has opened the new trading week modestly lower, testing the 76 US cent level as markets continue to digest hawkish remarks from US Federal Reserve officials late last week.

As at 7.55am AEST, the AUD/USD buys .7612, taking the decline from the highs seen two weeks ago to close to 2%.

Last week the Aussie lost 0.3%, the first weekly decline seen since late July.

AUD/USD Hourly Chart

While it is currently under pressure, Elias Haddad, senior currency strategist at the Commonwealth Bank, doesn’t expect it will fall much further in the week ahead.

“AUD/USD will likely find some support near 0.7550,” says Haddad, noting that this region corresponds with an area of technical support.

Along with technicals, Haddad also outlines four fundamental factors that will also help to underpin the Aussie: the prospect of more accommodative monetary and fiscal policies is supportive of the global economic outlook, commodity prices continue to recover which benefits Australia’s terms of trade, Australia’s economy is growing at an above trend pace of 3.1% p.a. and real Australian interest rates (inflation adjusted) remain a magnet for foreign capital in the current global environment of ultra-low and negative rates.

In what is a quiet data week for the Aussie — not just on the domestic front but also globally — Haddad suggests most attention this week will be on FOMC chair Janet Yellen’s speech at the Kansas City Fed Economic Policy Symposium at Jackson Hole that will arrive later in the week.

“Yellen may shed more light on the FOMC’s interest rate normalisation process and the policy consequences of a lower natural rate of interest,” he says.

With nothing on the domestic or regional front for markets to mull over on Monday, the performance of regional stocks, commodity futures and movements in the USD/JPY — often influential on the broader US dollar index in Asia — will likely dictate movements in the Aussie today.

Here’s the current scoreboard, as at 7.55am AEST.

  • AUD/USD 0.7612 , -0.0012 , -0.16%
  • AUD/JPY 76.62 , 0.29 , 0.38%
  • AUD/CNH 5.0677 , 0.0084 , 0.17%
  • AUD/EUR 0.6726 , 0.0001 , 0.01%
  • AUD/GBP 0.5820 , 0.0001 , 0.02%
  • AUD/NZD 1.0488 , 0.0021 , 0.20%

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