AUD/USD Recoups Losses As HK equity Sentiment Improves

AUD/USD sits back near 0.6435, slightly up versus NY closing levels on Monday. Earlier lows were at 0.6416. The turn around in sentiment coinciding with an improved tone for HK equities, which have recouped earlier losses to be tracking in positive territory. An extension of yuan bonds due for Country Garden has aided sentiment.

• Earlier we had a weaker September Westpac Consumer sentiment reading (-1.5% to 79.7), but a resilient business sentiment backdrop (NAB business conditions rising to 13 in August from 11 prior). This continues divergences in terms of consumer and business sentiment in Australia and didn't impact AUD FX.
• Commodity prices are also lending AUD some support, iron ore ticking above $118/ton. There remains a reasonable wedge between AUD/USD and iron ore futures prices though.
• China related sentiment has improved post yesterday's upside credit surprise, although we have activity prints out this Friday.
• Yield differentials remain fairly close to recent lows, last at -114 for the 2yr government bond yield spread with the US.
• For AUD/USD technicals, the 20-day EMA is not too far away, close to 0.6450. 0.6522, highs from end August, is seen as a key resistance point. 0.6357 is the Sep 6 and the bear trigger on the downside.