AUD/USD bears in control as CNH weakens

• AUD/USD is pressured and down by some 0.4% on Monday s the US dollar bounces back to life and CNH is pressured. 
• The economic calendar is full this week, including domestic Employment data. 

At 0.7425, AUD/USD is under pressure, down by 0.45% in mid-to-late New York trade as the US dollar firms vs the commodity complex and the softer Chinese currency for which the Aussie tends to track. AUD/USD, as a consequence, fell from a high of 0.7425 to a low of 0.7413. 

CNH weakened against the dollar on investor concern over capital outflow at the same time that the benchmark yield differentials between China and the United States turned negative. Yields on China's 10-year government bonds dropped below US Treasury yields for the first time in 12 years. Subsequently, USD/CNH has risen to a high of 6.3857 so far o the day as investors prepared for more monetary easing on the mainland.

To date, however, a surge in commodity prices has underpinned AUD’s outperformance dispute the recession narrative surrounding the global economy and risk-off themes pertaining to offshore geopolitics in Europe and middle Asia. The Ukraine crisis, on the contrary, has benefitted the Aussie for how distant the nation is to the prospect of local economic contagion risks. Moreover, the price of commodities has surged, further underpinning the demand for commodity-based currencies. Therefore, the positive correlation and high beta to global equities have started to break down. 

Analysts a Rabobank have noted that the rolling one-year correlation of daily AUD returns with the MSCI global equity index is barely positive and well below its decade average. They also note, however, that AUD’s rolling one-year correlation with DXY actually turned slightly positive in early April, briefly hitting its highest levels since 2005. The index today is slightly in the green after recovering the opening bearish gap pertaining to the jump and relief rally in the euro on the back of the French presidential elections. 

Eyes on data

For the week ahead, it will be a busy one on the data front. Domestically, the Aussie Employment report will be front and centre while a close eye will also be paid to its neighbouring central bank, the Reserve Bank of New Zealand. A 50% rate hike to the OCR could tip the balance of bids in favour of the antipodeans this week in the absence of any renewed uber hawkish reminders at the Federal Reserve. With that being said, US inflation data and Retail Sales will be eyed in that regard as well this week. 

As for the Aussie Employment, ''we are expecting another strong headline print of +40k, reaffirming the RBA's message that the labour market outlook remains upbeat,'' analysts at TD Securities said. ''Consistent with this, we pencil in a small uptick in the participation rate from 66.4% to 66.5%. Despite this uptick in the participation rate, we forecast the unemployment rate will fall to a record low of 3.9%.''