DancesWithAlgos Analysis

Australian Dollar Remains Under Pressure
The Aussie traded around $0.74 on Monday, its lowest since late November 2020 after losing around 0.3% in the 3rd week of July, amid a general dollar strength as investors assess the impact of the rapid spread of the Delta variant of COVID-19. New South Wales looks set to extend its strict stay-home orders after reporting 145 new virus cases on Sunday, up from 141 a day earlier; while Victoria today reported low numbers of new virus cases. Meantime, minutes from RBA's July policy meeting showed the effect of the recent virus outbreaks had created additional uncertainty and that the conditions for an increase in the cash rate would not be met until 2024. Investors now keep their eyes on whether the US Fed will reveal any concerns about high inflation when it concludes its two-day meeting Wednesday. Market participants also anticipate the release of Q2 Australia's inflation data later in the week.

US Dollar Holds Near 4-Month High
The dollar index stood at 92.9 at the start of the week, hovering near four-month highs of 93.19 touched last week, as investors anticipate the FOMC meeting this week for clues on the timing of stimulus tapering. Last week, the greenback ended a volatile week by gaining 0.2%, benefiting from a safe-haven bid on fears that a surge in infections of the Delta variant could derail the global recovery. The dollar strengthened from mid-June after the Fed sharply raised its forecasts for inflation this year and brought forward the time frame on when it will hike interest rates.

Dollar Edges Down
The dollar index edged down to 92.6 on Wednesday, retreating from over three-month highs in the previous session, as investors assess the impact of a spike in inflation rate and the need the Fed would have to tighten policy sooner than expected. Traders now await Fed Chair Powell testimony before Congress on Wednesday and Thursday for any further clues on inflation and monetary policy path.

Gold Prices Trade Near Monthly Highs
Gold continued its upward trajectory after gains of more than 1% last week, trading near monthly highs above $1,808 an ounce as market participants moved into the safe haven asset amid growing concerns that new coronavirus variants could slow down the global economic recovery. Sentiment was further supported as the Federal Reserve’s meeting minutes last week showed that substantial further progress on the economic recovery was generally seen as not having yet been met, though progress was expected to continue. Investors will also be, Federal Reserve Chair Jerome Powell is due to appear before Congress on Wednesday and Thursday for views on inflation after median expectations over the next 12 months jumped to 4.8%, the highest reading in history for a series that goes back to 2013.

We have some rather important data coming through this afternoon. Be mindful of positioning in USD

Australian Dollar Remains Weak
The Australian Dollar fell to below 0.747 remaining near 7-month lows hit last week. Australia’s domestic coronavirus situation continues to worsen in New South Wales amid proliferation of the Delta variant as infection rates expected to balloon over the next two weeks. Meantime, monetary policy differences between the Reserve Bank of Australia and the Federal Reserve have become more apparent, with the RBA set to taper bond buying to a weekly pace of A$4 billion after September from the current A$5 billion to provide monetary support the economy needs as it transitions from the recovery to expansion phase. Meanwhile, the Fed is not ready yet to provide a timeline to scaling back asset purchases as conditions have not met the “substantial further progress,” last week’s meeting minutes showed.