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Fundamental Analysis of the Australian Dollar: Bearish As the number of Covid cases rises, the Australian dollar stays weak. Hawkish As additional lockdowns are detected, the RBA signal fails to raise rate bets. If the June jobs report impresses, it could support the AUD. Increasing the number of Covid cases Check out the latest round of lockdowns. Another week of losses for the Australian Dollar has placed the currency near its lowest level against the US dollar since December 2020. The Australian Dollar fell 0.52 percent, 0.16 percent, and 1.37 percent versus its main peer currencies for the second week in a row, with AUD/USD, AUD/NZD, and AUD/JPY down 0.52 percent, 0.16 percent, and 1.37 percent, respectively. Prices and government bond rates both recovered slightly on Friday, but will the downward trend continue next week? Due to the persistent headwinds, the late-week recovery may not be sustained. A surge of Covid infections has swept Australia, leading policymakers to impose some of the most stringent social-discrimination measures seen this year. Sydney, the country’s largest city with a population of more than five million people, is in the penultimate week of a three-week lockdown. However, considering the deteriorating situation, it appears that the lockdown will be extended. On Friday, the city witnessed 44 new cases. The fact that only about 10% of the population is completely vaccinated adds to the country’s challenges, leaving little options other than economically debilitating lockdowns. Premier Gladys Berejiklian of New South Wales (NSW) said on Saturday morning that present limitations are likely to be extended beyond the scheduled expiration next Friday. “Unless there’s a big turnaround in the figures, I don’t see how we’ll be in a position to lift limitations by next Friday,” the state leader added. Active Cases in Australia worldometers.info is the source of this information. Faltering Betting Rates Despite the RBA’s hawkish signal The outbreak of illnesses has cast a pall over the economy, prompting bond traders to reduce their wagers on the Reserve Bank of Australia raising interest rates (RBA). The recent movement of the Australian Dollar and the domestic government bond market illustrate the shift in calculus for such bets. The 10-year yield has fallen 7.8% in the last week, dragging down the Australian Dollar. On Friday, prices retraced some of their losses as rates eased. Looking at recent monetary policy actions, the RBA’s July rate decision last week signaled a possible move toward rate hikes by opting to keep the April-2024 bond at its 3-year yield target of 0.10 percent and announcing a reduction in the next round of quantitative easing, which will be scaled back to a weekly rate of A$4 billion. The RBA’s actions and wording suggest that it is poised to move forward its timeframe for a possible hike in 2023. Australia’s 10-year Bond Yield vs. the Australian Dollar Outside of the immediate reaction, which saw the Australian Dollar gain, markets remained dubious. “The requirement for a raise in the cash rate depends on the data, not the date; it is based on inflation outcomes, not the calendar,” RBA Governor Philip Lowe said later in the week, appearing to dampen expectations. Cash rate futures’ indicated rate declined marginally. Overall, the Australian Dollar’s near-term trend appears to be biased to the downside, with the lockdowns and increased social-distancing measures exerting a significant influence. A boost in vaccination rates could help mitigate such dangers, but getting to the point where it slows the spread of illnesses is still a long way off. Traders will be paying particular attention to a number of potentially damaging economic data releases, as well as fresh virus instances and government actions. The July Westpac consumer confidence index will be released, followed by the June employment data later in the week. Analysts forecast a growth of 30k jobs, down from 115.2k the previous month, according to the DailyFX Economic Calendar. The jobs report is expected to influence the market, as a better-than-expected reading could change rate bets. Economic Events to Keep an Eye on in the AUD DailyFX Economic Calendar is the source of this information. TRADING RESOURCES FOR THE AUSTRALIAN DOLLAR —- Thomas Westwater, a DailyFX.com analyst, wrote this article. Use the comments area below to contact Thomas, or follow him on Twitter at @FxWestwater./nRead More

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