SYDNEY: The Australian and New Zealand dollars were rangebound in thin liquidity on Monday as traders await the next catalyst for the global interest rate outlook, while shrugging off China’s surprise decision to leave a key policy rate unchanged.
The Aussie edged 0.2% higher to $0.6699, having ended last week with a small drop of 0.4%.
It faces stiff resistance around $0.6730, a level that it has failed to breach four times in the past month, while support is around $0.6640.
The kiwi dollar held at $0.6240, after finishing last week flat.
It faces resistance at $0.6275, with support at about 62 cents.
A holiday in the United States made for thin trading, but the Australian dollar has been one of the weak currencies in the last week even after US data pointed to a cooling in underlying inflation, with markets ramping up bets of rate cuts as soon as March.
It did not get much love from a local inflation report that showed price pressures are easing and a sharp fall in iron ore prices last week pointing to still sluggish demand in China, its biggest trading partner.
Australia, NZ dollars bolstered as markets hunger for US, EU rate cuts
“The ranges last week in FX were just very subdued. And I think that’s sort of reflecting the fact that a lot seems to have been priced for Fed rate cuts and now it’s just waiting to see what comes next,” said Tony Sycamore, market analyst at IG.
“I haven’t traded any currencies this year because they just don’t seem to be showing any signs of life.
The Aussie has been just between 6640 and 6740ish, which is not very interesting.“ Indeed, the Aussie steadied after dipping a little on China’s decision to leave the medium-term policy rate unchanged, defying market expectations.
However, stakes could get higher with the release of Australia’s jobs data on Thursday.
Economists expect the economy added 18,000 net jobs in December, while the jobless rate is likely to remain unchanged.
Markets now expect the Reserve Bank of Australia is done tightening, with the cash rate peaking at 4.35%.
They also have priced in modest easing of just 50 basis points this year, given monetary policy in Australia is less restrictive compared with other major economies.