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Research Analyst

Has the AUD peaked in 2021?


Consider this: In the 66 weeks since the AUD reached a low of 0.5741 in March of 2020, the AUD has strengthened over 43 of these weeks. If you want to consider the weeks in isolation from one another, this translates to an approximate 2:1 win rate for the AUD.

The AUDUSD is trading at 0.7524 at the time of writing.

The majority of the weeks that AUD has weakened against the USD have occurred since February 2021. The frequency of bearish AUD weeks really began to pick up at this time.

This poses the question: has the AUD peaked in 2021? And can we expect a considerable turn to the downside during the rest of the 2021? What things might we consider when evaluating where the AUD will move in July and beyond?


Has volatility subdued?

Volatility has definitely subdued in the pair, as the worst of the pandemic is likely behind us. For the best part of 2021, the pair has consolidated between 0.7550 and 0.7900.

From the view of the weekly, the pair is currently edging past the lower bound of this range. From the perspective of the daily chart, the pair is flirting with the 50.0 retracement level.

The smaller time frames might reveal if the AUD bears aim to force the pair to retrace back to the 61.8  Fib level.

Likely, but not definitely

Butting up against this predication is the Delta variant that has spread Downunder. Several of Australia’s territories have reimplemented lockdown measures, while quarantine-free travel between the country and its close partner, New Zealand, has been temporarily halted. In saying this, the effects of the current lockdown measures are not expected to be incredibly disruptive and are not are strict as those implemented throughout 2020.

The story is a little different in the US. Very little concern appears to be directed toward Covid Classic or its Delta Variant. The success of the US vaccination program seems to quell fears of Covid. The Australian vaccination program has been much slower than the US. The Aussies had the advantage of taking their time in dispensing vaccinations, as the virus was not rampant in the country.

The consequence of this slow rollout means that the tables have turned in the global race to recover from Covid. Like Australia, the countries that eradicated the virus early are now behind the ball with vaccination and thus more suspectable to further waves of the virus.


Nonfarm Payroll due this Friday

Setting the tone for the AUDUSD for July will be the high impact reports due this week.

On Thursday, we are expecting the Australian Trade Balance (May). Strong Commodity prices, especially Iron Ore, is expected to lift the country’s Trade Balance to a surplus of AU$10B. Industrial metal prices moving forward will be a factor in deciding the fate of the AUD.

The following day, the US will release the hotly anticipated Nonfarm Payrolls for June. Analysts are expecting approximately 690K jobs to be added to the economy. However, predictions have been off the mark by uncomfortable margins in the past few months. For example, in April, the actual number of jobs created was lower than 650K than predicted.

Since April, the US economy has had time to settle down slightly, but a Payroll figure less than expected wouldn’t be shocking. However, if this was to occur, the impact on the USD could be minimal. In April, the USD reacted mildly to the terrible Payroll figures. This might be because slower job growth can help keep talk of the Fed tapering its stimulus at bay for a little bit longer.

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