The aussie has been a laggard amongst the other commod-$ currencies (CAD,NZD)recently with central bank divergence playing a key roll after the RBA confirmed once more it is in no hurry to withdraw stimulus. This is in stark contrast to the Bank of Canada especially, who have started on the path to policy normalisation. Commodity price swings have also played a big part in the aussie’s (under)performance in the past week, with the China-led selloff in iron ore limiting any upside.
Domestic data is getting an increasing focus as the RBA gets closer to deciding if it will roll and extend its bond buying target to the end of 2024, so tomorrow’s jobs report for April will be closely scrutinised. The March employment gain of 70.7k pushed the unemployment rate down to 5.6% from 5.8%, even though participation rose to a record high. A slower pace of 20k jobs gains is expected this time with unemployment stalling at 5.6%, but any meaningful miss in the headline will attract more AUD sellers. The issue for those hoping AUD can appreciate is that even a solid beat may prove uninspiring as the RBA isn’t turning hawkish any time soon, especially with subdued inflation.
AUD/USD bulls struggling to push on
Technically, AUD/USD has been in a 76-78 range more or less the whole year and the pair has laboured anywhere above 78, with even the February move up to near 80 only lasting a handful of days. Thoroughly uninspiring when commodities have been on a tear. But with the RBA being ultra-patient, at least the upward trendline from this time last year is supporting prices as well as the 50-day SMA. If we drop below 77 then the bottom of the range below 76 comes into view quickly. For longer-term traders, the right shoulder of a head and shoulders reversal pattern looks to be forming on the weekly chart if we do breakdown and the upside currently looks capped by the 100-month SMA on the monthly chart.
AUD/CAD more interesting and at key support
A more exciting pair and one showing the contrast in performance is AUD/CAD. We made new cycle lows today which puts more downside in play after recent consolidation. The selloff in oil is hampering CAD today but prices are towards the lower end of the bearish channel and trend signals are set up for the pair to move lower targeting the mid-0.92s October lows if the bears can close below near-term support at 0.9338. Resistance above is at last week’s high at 0.9431.