The Australian dollar experienced a 1.82% rise against the US dollar last week, propelled by positive economic news for Australia closing at 0.6751. However, the AUD dropped by 0.52% against the Canadian Dollar due to concerns about a recession that limited the AUD's potential. Last week, the US released its non-farm payrolls report which surpassed expectations, with 253K non-agriculture jobs created, providing a bullish outlook for the USD.
Tuesday is a significant day for AUD as the Australian government is set to release its annual budget report, and the quarterly retail sales report is also expected. These economic data are crucial in determining the AUD's price volatility. On the US side, the Consumer Price Index report will be released on Wednesday, followed by the Initial Jobless Claims report on Thursday. Positive CPI numbers and a drop in jobless claims are needed for bullish market conditions for the USD.
Last Friday, the AUD/USD climbed to a two-week high, surpassing both its 50 and 200 Moving Averages. Fresh selling against the USD allowed the Australian dollar to climb in the charts. However, external uncertainty is gripping financial markets as investors are concerned about a full-blown financial crisis in the United States. They are also apprehensive that regional lender PacWest Bancorp may be the next possible domino to fall. Meanwhile, the Federal Reserve has developed a more strict and data-driven strategy for subsequent rate hikes.
Over to the US regional banking crisis, where First Horizon Corp. and Western Alliance Bancorp joined PacWest as the latest victims of short selling. Three days after JP Morgan’s acquisition of First Republic Bank, CEO Jamie Dimon declared that ‘this part of the crisis is over’. First Horizon share price is down 33%, Western Alliance is down 40% while the week-to-date loss for PacWest now stands at 70%.
AUD/NZD
The AUD and NZD pair were neck and neck this week, with the AUD taking the upper hand bouncing from 1.0637 to finish the week at 1.0726. Buyers are still wary of recession fears in Australia. As a commodity-linked currency, the AUD faces more risk during slow economic growth, and with recession fears, buyers are cautious.
After reaching its area a couple of times through March & April, is this an area of support while we see a push upwards?
Thanks for reading and as always, give me a call or email me for any assistance in the FX markets.
I'm a huge advocate for risk management, so if you want to take advantage of any of these moves then call or email me anytime.
Chris