The heavily oversold Aussie may have put in a temporary reprieve at the back end of last week as US – China trade talk rumours and emerging market action pushed the dollar lower. It may be too early to say that the Aussie is in full recovery mode, but the small steps are a positive move, and the US dollar is showing signs of running out of steam.
The domestic story remains fairly uninspiring, although we did see some decent Australian jobs growth. The Reserve Bank of Australia (RBA) minutes on Tuesday may offer some more clarity on the central bank's policy thinking - in particular, whether domestic banks raising mortgage lending rates will have any effects on the RBA's willingness to adjust rates.
AUDUSD managed to hold on to the 0.7000 level, which was the only saving grace for a torrid last few days of the week. However the move from lows at on October 10 have given life to the battered currency. The recent bounce has turned 0.7100 as the key downside support level, which is S1 on the daily pivot points.
The currency will be at the mercy of the US as any more stock market slumps, or bond yield moves will add to downside. With the start of earnings season in the US it is yet to be seen whether the company data will help or hinder the stock market uncertainty.
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US equities continue to welcome any high-risk event being put in the rear-view mirror – especially when rates markets look prime to consolidate lower