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  • AUD/USD is finally correcting in better risk mood after hitting the lowest levels since January 2017 down at 0.7202 yesterday.
  • AUD/USD is currently trading at 0.7238, up from today’s low of 0.7208 having made a high of 0.7240 so far.

The Lira is continuing to reverse higher and has ‘dipped’ below the 6.00 handle to 5.8588 the low so far on the Qatar headline pledging to invest $15 billion into the troubled nation’s economy.    

Locally, however, there is little supporting the case for a stronger Aussie and analysts at Rabobank argue, ‘against a backdrop of USD strength’, that AUD/USD should edge towards 0.70 on a 12 mth view.  

Looking ahead the RBA is forecasting that “CPI inflation is expected to be quite low in the September quarter”. It has also signalled that the “Board does not see a strong case to adjust the cash rate in the near term”:  

“AUD has been the second worst performing G10 currency after the NZD.  Although the AUD’s status as EM proxy has this week exposed the unit to selling pressure stemming from Turkey, it is the news from China that is likely to have a more deep-rooted impact.  Risks regarding Chinese growth in addition to further USD strength both suggest that AUD/USD is likely to remain under pressure in the coming months.”

The  RBA is unlikely to stand in the way for further slippage in the value of the AUD

Furthermore, the analysts explained that the RBA is unlikely to stand in the way for further slippage in the value of the AUD:

“In its Statement on Monetary Policy published earlier this month, policymakers commented that “Australia’s terms of trade are projected to decline moderately, as growth in Chinese steel demand slows and additional global supply of bulk commodities comes on line”.  More importantly, it also argued that “a number of factors have been combining to keep inflation low”. “

AUD/USD levels

AUD/USD remains vulnerable in the depths of the 0.72 handle while trading under the bear pennant and 61.8 Fib of 2016-18 rally which bolsters bearish technicals. The 4hr sticks shed some positive light within an otherwise broader bearish trend with the price piercing the 10 SMA on the same time frame – RSI has also stablised. However, weekly technicals remain bearish and the price can target the 0.7110/60 within the descending channel’s vicinity on a break of the 0.72 handle and below the 2001- 2018 uptrend line at 0.7176.