A$ Correlations Stronger With Global Equities/Yields Than Commodity Prices

AUD/USD is nudging higher, the pair last 0.6780/85, which is close to recent highs near 0.6800. For the pair 0.6799, the Jul 11 high is seen as key resistance. Beyond that lies 0.6839, the Jan 2 high. The Aug 22 low, just under 0.6700 is a support point.

• We are only 0.15% higher for the session so far today, but the A$ is outperforming yen and some higher beta plays in Asia FX.
• The currency is getting some support from higher commodity prices, particularly iron ore, which is back close to $102/ton in terms of the active SGX contract. Broader metal prices are also higher in recent sessions.
• Over the past 12 months global equity trends have had a stronger correlation with AUD/USD shifts. The table below presents levels correlations between AUD/USD and key macro drivers.
• The second highest correlation rests with AU-US yield differentials (1yr ahead 3 month differential).
• Commodity correlations are positive for metals and iron ore, but negative for aggregate commodities (which obviously includes oil).
• Focus will likely be on whether AUD/USD can break higher without sponsorship from global equities, which have consolidated to start the week or higher yield spreads (which have also consolidated close to recent highs).
• Note tomorrow on the domestic front we get July monthly CPI figures.

Table 1: AUD/USD Correlations With Key Macro Drivers - past 12 months

Source: MNI - market News/Bloomberg