Data Flurry to Inspire a Range Break?

Last week’s narrow AUD/USD trading range of 0.7588 to 0.7677 was the first sub-1 cent weekly range since November 2020. This week’s busy Australian data calendar could inspire clearer direction for the Aussie.
Data flurry to inspire a range break?

Last week’s narrow AUD/USD trading range of 0.7588 to 0.7677 was the first sub-1 cent weekly range since November 2020. The Aussie is dead flat versus the US dollar since the US March employment report was released on Good Friday.

Given how strong this report was – non-farm payrolls +916k with upward revisions, unemployment rate down to 6.0% – US dollar bulls could be forgiven for being disappointed that the greenback’s rally didn’t continue. Perhaps key was the muted response in US Treasury markets. While the 10 year bond yield flickered up to 1.72% after the booming payrolls data, it starts this week around 1.67%, cooling the US dollar’s yield appeal.

This was evident in the euro’s rise again the US dollar despite Europe’s ongoing struggle with both new coronavirus cases and the vaccine rollout (the US has administered about 55 vaccine doses per 100 people, versus 21 in Germany). A busy US data calendar this week will be a renewed test of this dollar pullback, including March CPI and retail sales, which is expected to be very strong.

The Aussie is lower over the week against the euro, Canadian dollar and haven currencies Swiss franc and Japanese yen, but about flat versus the kiwi and up against the curiously soft British pound, which has had a good run this year. AUD/USD tested the 0.75 handle multiple times, but has closed the global trading day no lower than 0.7580 since late December.

Lending support to the Aussie on dips, the accelerating US recovery is underpinning global risk appetite, with the MSCI World Index hitting a fresh record high on Friday. The daily correlation between the Aussie and global equities remains solid.

Less helpful in coming weeks is the chance that Australia is heading into a period of softer Australian data in the wake of the expiration of the JobKeeper program. We might see a glimmer of this effect in the April Westpac consumer sentiment survey, but not in the always important Australian labour force survey on Thursday.

This is the final survey conducted under the program and Westpac looks for a further 32k rise in employment in March. Data including weekly payrolls, job vacancies and the employment indexes of business surveys suggest upside risks to the headline jobs number, though rising participation should keep the unemployment rate at 5.8%.

The busy local and global data calendar could inspire a break in AUD/USD’s tight ranges, though the releases don’t really kick off until Tuesday.

Event risk this week

Aust Mar NAB business confidence, China Mar trade balance, US Mar CPI (Tue), Aust Apr Westpac consumer sentiment, RBNZ policy decision, Singapore Q1 GDP and MAS policy decision, Fed Chair Powell speech (Wed), Aust Mar employment, US Mar retail sales, US Apr Empire State and Philly Fed business surveys (Thu), China Q1 GDP, Mar industrial production & retail sales, US Mar housing starts, US Apr consumer sentiment (Fri)