Send Currency Update 21st June

The AUD had a roller coaster of a week against almost all major currencies. Risk sentiment kept the AUD pinned down in spite of overwhelmingly positive jobs data for May. With no light at the end of the tunnel, the investors are making a rush for safe-haven currencies. 

AUD - USD

The AUD-USD pairing had a lukewarm week that saw the AUD gain almost 2.70% against the USD during the week before losing 2.17% by the end of the week. 

AUD started the week on a bearish pattern that has been going on for some time now. Hawkish FED policy and the concerns of a looming recession are driving investors towards safe-haven currencies. This move is putting immense pressure on fundamentally strong, more risk-sensitive currencies like the AUD. 

However, mid-week the AUD broke the pattern and spiked up after overwhelmingly positive jobs data for May came out. Unemployment is at a 50-year low and full-time employment increased by an astounding 69.4k during the month of May. What this data means is that the RBA will now tighten its belt to pursue a more aggressive monetary policy because there is clearly a lot of room in the economy to hike the interest rates to keep inflation in check. 

Earlier in the week, it touched 20 years high before falling and losing almost 2% of its value after the FOMC announced another rate hike. The USD however recovered on Friday as risk-on sentiment returned to the market. Analysts are still trying to understand why the USD behaved the way it did. For the time being the current investor sentiment based on technical analysis is to sell AUD against the USD for the next week. 

AUD - EUR

The AUD-EUR pairing has also been on a roller coaster ride in the past week. The AUD gained almost 2.02% of value due to the dovish ECB and weak EUR but it soon gave way to risk sentiment to lose all of this value before the week even ended. 

The week started on a bearish trend that continued from last week. Even though EUR is weak and ECB is too far behind in the race of controlling inflation which is already touching 8% in Europe, the AUD was losing ground to EUR because of the risk sentiment. 

However, the release of stronger-than-expected jobs data for May pushed the AUD up mid-week. While this created a spike, even such strong fundamental indicators could not break the pattern and the AUD soon lost all of its newly gained value. This pullback happened because macro factors triggered another risk on phase for the investors who began to flock to save haven currencies due to the fears of another recession on the horizon. 

The current investor sentiment based on technical analysis is to sell the AUD against EUR for the next week.

AUD - GBP

Compared to other pairings the AUD had a less turbulent week against the GBP. The week started with AUD on the bullish trend that continued from last week. It gained almost 1.23% by Thursday before BoE raised the interest rates by another 25 bps, this move strengthened the GBP and made the investors sell AUD to cash into the higher interest rate. This caused the AUD to go into freefall and lose almost 1.81% in a single session. 

The jobs data report for May put on emergency brakes and saved the AUD from crashing further. Why was the AUD not able to hold its own in spite of being fundamentally stronger than the GBP? The answer is simple, investors are in a very risk-averse mood at the moment. 

There is no proverbial light at the end of the tunnel over the next two or three quarters at least. The current commodity super cycle is likely to strengthen more, forcing central banks to become more hawkish. Investors understand that this will lock many economies into a vicious cycle that will end up triggering a global recession somewhere around the winters. This is why there is a rush for safe-haven currencies.  

This is why we are seeing the fundamentally weak GBP rally against the fundamentally stronger AUD. Technical indicators are neutral for this pairing for the next week. Risk sentiment will dictate terms in the market. 

AUD - NZD

The AUD started the week on a good note topping the NZD at 1.1162 before losing all of the gains that the Aussie had accumulated since the start of June. At this point, the interest rate differential is a key determinant of the relationship between these two currencies. 

NZD is currently more attractive on account of its higher interest rate. The RBA is in a hawkish mood and further belt-tightening this year may end up decreasing this interest rate differential. 

The AUD is also under very serious downward pressure not only from the risk sentiment but also from the Chinese economy which is struggling to recover due to the recurring virus outbreaks. 

In spite of being fundamentally strong, there is very little that can be done to remove downward pressure from the AUD. It is not all bad as the Australian economy is benefiting from the conflict in Europe and the diversion of buyers who are now looking to Australia to supply the same commodities that they used to buy from Russia and China. Timely policy-making can capture this market and turn this into a positive for the economy in the long run. 

Based on technical analysis, investor sentiment is neutral for this pairing for the next week. 

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