Aussie dollar range bound; beholden to the ebb and flow of risk aversion

Daily Currency Update

The Australian dollar appeared poised to break back above 0.70 US cents through trade on Monday, following equities higher before a swift reversal in risk demand drove both the AUD and key equity indices lower. An increased appetite for risk helped push the AUD higher through out the domestic session with added support coming as the number of new COVID19 cases in Victoria fell. Testing resistance at 0.6990 the AUD’s upward momentum suggested a sustained surge in risk demand could see a break above 0.70. While the Nasdaq and ASX rallied the S&P 500 broke into positive territory for year before profit taking and a swift risk off move sent the AUD back below 0.6950.
The AUD remains range bound, entrenched within a narrowing band, shifting between 0.6930 and 0.6990. Volatility within narrowed ranges remains high as markets continue to battle expectations for a recovery and an ever-increasing uncertainty around the length and scale of the economic recovery. While there is hope the Victorian outbreak may have been controlled the number of new COVID19 cases around the world shows little signs of slowing. Florida alone reported 12 new cases through Monday while India battles to control the outbreak. With the global growth expectations waning risk demand rest solely with sustained and ongoing fiscal and monetary policy support. We expect the AUD will remain range bound through the short term battling to break outside broader ranges between 0.68 and 0.70.