Interesting to see how any realization of stagflationary risks affects key currencies that sit astride conflicting themes that such a realization brings. The risk of ever higher commodities prices and an eventual repricing of the forward rate curve as the RBA trips over its forward guidance by early next year could prove very supportive for the Australian dollar, while the risk of cratering risk sentiment and forward concerns for the real growth outlook could add a negative drag. For now, AUDUSD is knocking at the door on key resistance and has poked above the local pivot high. We would like a couple of ugly days of equity markets selling off with AUDUSD simply taking that development in stride and not selling off before believing that we are headed for a major push higher back into the zone above 0.7600. But regardless, the technical lay of the land is such that the 0.7500-0-7600 zone looks to be the key for establishing whether the chart remains structurally bearish or is neutralized by a rally back into the upper zone.
The Reserve Bank of Australia issued the minutes of its last meeting, but nothing was found. In the document, policymakers voice confidence in the economic recovery but reiterate that a rate hike won’t happen until 2024. The AUD/USD exchange rate rose for a third straight week, traded near a new three-month high of 0.7545. Although speculative interest ignored the dollar’s usually positive hints, the Australian dollar mimicked Wall Street momentum. Australia will focus on the CPI forecast for the third quarter, September retail sales forecast for 0.2%, and third quarter PPI forecast for 3.2%.