Playing The Range

A flat start to Friday’s Sydney session when it comes to AUD/USD, with the rate dealing little changed around $0.7355. There wasn’t much in the way of meaningful reaction to RBA Governor Lowe’s latest round of communique.

• Lowe has continued to embed optionality into lift off timing when it comes to the cash rate. He once again noted that it is plausible that the cash rate could start to rise this year or in ’23, while flagging a move closer to sustainable inflation within the Bank’s target range (although he noted that Australia is not there yet), which means that he isn’t feeling any “pressure” when it comes to hiking rates. Lowe then pointed to close attention re: inflation psychology. He also noted that there are multiple strong internal candidates to replace outgoing Deputy Governor Debelle.
• AUD/USD pared its Sydney losses into London hours on Thursday, as the early USD bid moderated. The cross then extended higher as the DXY faltered on the back of a hawkish opening round of ECB communique (swift wind down of QE). AUD then outperformed as the DXY recovered from lows during ECB President Lagarde’s press conference as she attempted a bit of a balancing act, before the rate nudged away from session highs into the NY close.
• Well defined technical lines in the sand remain valid. Resistance comes in at the Mar 7 high/bull trigger ($0.7441), while support is layered in at the 20- & 50-day EMA, with the Mar 8 low sandwiched in between.
• With nothing on the local docket Friday’s session will come down to watching headline flow and wider commodity price swings.