AUD gives up approach to 0.74 amid cautious start to week

Daily Currency Update

Markets adopted a cautious approach through Monday forcing equities, commodities, commodity currencies and risk assets lower. Softer than anticipated Chinese industrial production and retail sales, coupled with a downturn in fixed asset investment and an uptick in the unemployment rate fostered new concerns the prolific Delta strain could derail the Chinese economic recovery. The AUD fell steadily throughout the domestic session giving up 0.7375 early to test intraday day lows at 0.7320 before tracking sideways overnight. Broader concerns surrounding the spread of COVID-19 and the Delta strain have forced markets to sideline reflation hopes and driven the AUD into a narrow trading range. With supply chain blockages expected to worsen as Southeast Asia battles to maintain production under the growing weight of new infections and Australia itself struggling to squash its own outbreak then we see little upside for the AUD through the near term. Resistance on moves approaching 0.74 appear hard to breach while support above the July low remains intact for now. We expect the AUD will remain largely range bound through the near term as markets maintain a cautious approach, sidelining big bets. We anticipate risk will continue to be skewed to the downside until a brighter pandemic outlook is available. Our attentions now turn to Thursday labour market drop, the first full look at the impacts of the Greater Sydney Lockdown.