AUD/USD awaits speech by RBA’s Lowe for direction

At 0.6827, AUD/USD is trading between a 0.6784 and 0.6854 range but is higher by 0.5% on the first trading day of the week in midday New York trade. However, the pair is significantly higher than the fresh bear cycle low that was printed last week which was the lowest it has been since June 2020, at 0.6682.

Net AUD short positions have moved higher reflecting concerns over the outlook for commodity prices. However, the Australian dollar is showing some signs of resilience which could be down to the economic rebound from Covid lockdowns.

Australia’s domestic economy continues to provide the Australian dollar with support. June business confidence and July consumer sentiment fell but hard data on the likes of retail spending and employment remain consistent with a strong rebound from Covid lockdowns.

Australian jobs surged 88K in June, slashing the Unemployment Rate from 3.9% to just 3.5%, the lowest since 1974. The data was important and the Australian dollar firmed the sentiment surrounding the reserve Bank of Australia.

The booming jobs data sparked debate over whether the RBA might speed up the pace of tightening with a 75 basis point cash rate rise in August. There are calls for another 50bp move, to 1.85%. Market pricing is around +55bp. A speech coming up by Governor Lowe should shed some light on the debate.

Eyes on the Fed

As for the US dollar, markets are gearing up for the Federal Reserve meeting on 26-27 July FOMC meeting. The Fed speakers are now in the blackout period and the conclusion from the hawkish rhetoric in statements made by Fed speakers between the last meeting to date is that while US June inflation was even higher than expected, 9.1% year from 8.6% year in May, there is more of a bias of a 74bp move over a 100bp hike. In turn, the US dollar has lost some shine to trade back below 107 on Monday as per the DXY Index.