AUD/USD Gets Close To 0.6800 Before Retracing, AUD/JPY Off Cycle Highs

AUD/USD got close to 0.6800 not long after the US CPI print, with yen gains (suspected intervention driven), aiding the move. This was fresh highs in the pair back to early January of this year. We pulled back though as the US session unfolded and track around 0.6760 in early Friday dealings, after posting a modest 0.18% gain for Thursday's session.

• For AUD/USD focus remains on the upside, 0.6839 is the Jan 2 high, while on the downside the 20-day EMA is back at 0.6687.
• US yields finished lower across the benchmarks, with the front end leading (2yr down to 4.51%, off nearly 11bps). Rate cut expectations are building post the softer headline CPI, with supercore (services ex housing) falling for the second straight month.
• Still, some offset for the A$ came via a sharp pullback in US equity sentiment, with the SPX down 0.88% for Thursday trade. This didn't look like a risk off move, but rather rotation out of large cap outperformers and shifting into stocks that could benefit from lower US rates.
• Another factor for the A$ was the USD/JPY pullback, with strong speculation that the authorities intervened in JPY (post the US CPI miss) to propel gains. AUD/JPY got close to 107.00 in US trade, but sits around 107.40 in latest dealings. Earlier Thursday highs were at 109.37, fresh cycle highs.
• In the commodity space, the Bloomberg aggregate commodity index rose 0.27%, the first gain this week, while the metals sub index fell nearly 1%. Iron ore couldn't sustain earlier Thursday highs and is back under $107/ton in terms of the active SGX contract.
• The local data calendar is quiet until next week's jobs report (due Thursday). In the option expiry space, note the following for NY cut later today: $0.6790-00(A$965mln).