The AUD outlook still looks bleak
Despite the fact that AUD/USD continues to hold just above the 0.7100 handle, things aren’t really getting any better for the aussie. As risk improved at the start of the week, AUD/USD failed to muster any decent rally as highs touched around 0.7130 before falling back again.
And that’s a testament to how the aussie has been trading for majority of the year. It just can’t get off the floor no matter what the situation is, even if there is good news.
Right now, there’s minor daily support still holding it from a further fall below 0.7100 but unless there’s some squeeze in positioning, AUD/USD looks set for a trip towards 0.7000 once markets decide to take their hands off the pause button.
The key risk event in the day ahead for the aussie will be the labour market report tomorrow. If the readings there disappoint, expect the aussie selling to resume. And even then, any rallies will be sold into as long as the trade rhetoric continues to lurk in the background.
The RBA painted a picture of the glass being half full in its latest statement earlier this month by leaning on the labour market to do the heavy lifting while household debt remains high, wages growth remain stagnant, and inflation is in limbo. So, if the labour market itself starts to show signs of softness, expect aussie bears to pounce on that.