AUD extends downturn despite rebound in equities and risk sentiment

Daily Currency Update

AUD - Australian Dollar

The Australian dollar continued its downward correction through trade on Thursday slipping below 0.73 US cents, despite a rebound in equities and an improvement across risk assets. Domestic labour market data underperformed in October, showing a surprising contraction in employment growth and an uptick in the underlying unemployment rate. The AUD tested 0.73 before finding some support, as investors appeared reluctant to place too much stock in current labour market performance. NSW, Victoria, and the ACT are only now emerging from harsh lockdown restrictions, and forward indicators suggest strong gains across the labour market should be enjoyed in the coming months. Markets continue to price in a 100-basis point rate hike through the next 13 months, confident as inflation expectations rise the RBA will have no choice but to abandon its dovish forward guidance policy. Having tracked sideways through what was a largely quiet overnight session, the AUD finally slipped below 0.73 and currently buys 0.7289 US cents. Having broken a number of key technical supports, the AUD has entered a bearish channel and in the absence of a solid and sustained rebound in risk sentiment, could extend through 0.72 and toward supports at 0.7170. Our attentions today remain with the risk narrative and broader USD performance, with little on the macroeconomic ticket to drive direction.