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AUD/USD price action in response to modest equity and commodity weakness suggests some fragility near-term as DXY pushes higher. In the medium-term, upside is still intact to 0.79 and beyond on synchronised global revival from the pandemic, economists at Westpac brief.

Key quotes

“The scale of the Aussie’s decline over the week seems large relative to the wobbles in equities and commodities. Some of the weakness may be collateral damage from NZD which was softest in the G10. Otherwise, the A$ slide is probably due mostly to its role as a high beta alternative to the US$, with DXY breaking into higher ranges this week.”  

“Next week JobKeeper expires, with many watching for the impact on employment. Workers on zero hours are still >50K above pre-pandemic levels but the total layoffs are likely to be larger.”  

“AUD/USD is at an important juncture, with no significant support between 0.7564 (2 Feb low) and the 200-dma around 0.7370/75. But if DXY pauses, A$ should be able to build a base around 0.7600.”

“Our end-Q2 target remains 0.7900.”