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FOREX: AUDUSD Weakness Standing Out, Extends Pullback from 0.6400

FOREX
BulletMarketsForeign Exchange Bullets
  • Despite a more stable tone for major equity benchmarks on Wednesday, AUD and NZD weakness is standing out, with both currencies roughly half a percent weaker on the session against the dollar. A moderate uptick for US yields might be assisting the greenback, with some analysts pointing to the softer Australian data overnight providing an additional AUD headwind.
  • January headline CPI inflation printed slightly lower than expected at 2.5% y/y, in line with December. However, the underlying trimmed mean rose 0.1pp to 2.8%, but still below the top of the RBA’s 2-3% band. As a reminder, the first month of the quarter has limited updates for services inflation.
  • Another possible contributor - Australia is planning to review the fallout on Southeast Asia and the Pacific of President Donald Trump’s planned cuts to USAID. The government’s latest foreign policy assessment warned of an “increasingly unpredictable” global strategic outlook, potentially limiting the optimism for higher beta currencies at this juncture.
  • For AUDUSD, 0.6400 has proved a significant pivot on a closing basis over the last 10 months, and latest weakness extends the pullback from last week’s high (0.6409) to around 1.5%. Spot is currently testing 50-day EMA support, crossing at 0.6316 and further weakness would refocus attention on 0.6231, the Feb 10 low.
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  • Despite a more stable tone for major equity benchmarks on Wednesday, AUD and NZD weakness is standing out, with both currencies roughly half a percent weaker on the session against the dollar. A moderate uptick for US yields might be assisting the greenback, with some analysts pointing to the softer Australian data overnight providing an additional AUD headwind.
  • January headline CPI inflation printed slightly lower than expected at 2.5% y/y, in line with December. However, the underlying trimmed mean rose 0.1pp to 2.8%, but still below the top of the RBA’s 2-3% band. As a reminder, the first month of the quarter has limited updates for services inflation.
  • Another possible contributor - Australia is planning to review the fallout on Southeast Asia and the Pacific of President Donald Trump’s planned cuts to USAID. The government’s latest foreign policy assessment warned of an “increasingly unpredictable” global strategic outlook, potentially limiting the optimism for higher beta currencies at this juncture.
  • For AUDUSD, 0.6400 has proved a significant pivot on a closing basis over the last 10 months, and latest weakness extends the pullback from last week’s high (0.6409) to around 1.5%. Spot is currently testing 50-day EMA support, crossing at 0.6316 and further weakness would refocus attention on 0.6231, the Feb 10 low.