With a relatively light economic calendar, trading in AUD/USD was confined to a range in European trading on Friday. The pair found bids near 0.7520 but recoveries were limited to around 0.7540.
The US dollar index (DXY) extended higher within a recovery. Two failed attempts at 99.43 support on Thursday has elicited a move higher leading to a breach of Wednesday’s high. DXY is seen testing the psychological 100.00 handle in the North American session which is proven to be a hurdle thus far.
A major catalyst for the euro, and as a result the dollar, will be the French election which will be held on Sunday. The dollar is likely to remain confined to a range for the remainder of today’s session, however, there is a risk of a volatile price fluctuation at the weekly open as markets digest the election results. While the Australian currency will have less of an impact, AUD/USD is at risk of a gap at the open next week due to potential fluctuation in the dollar.
AUD/USD is on track to post a second consecutive day of gains following a sharp drop in the early week. The biggest driver for the pair this week was the meeting minutes release from the Reserve Bank of Australia. The central bank was less optimistic than expected and changed its tune from the earlier released rate statement, triggering a drop in the Aussie.
Despite a recovery to erase some of the losses from the early week, the exchange rate is on track to post a small loss this week after a strong gain in the prior week.
The Australian currency is the second weakest currency versus its major counterparts in the week thus far. It has only gained against the loonie, which led the decliner’s list. The British pound was the strongest, gaining nearly 3% versus the Aussie. The bulk of gains in the pound came on Tuesday after PM Theresa May called a snap election.
Economic releases that stand to carry a strong impact on AUD/USD next week include Australian quarterly CPI as well as US consumer confidence, durable goods orders and the first reading of quarterly GDP.