AUD/USD looks vulnerable to a break below 0.7590 – TDS

The AUD is the main laggard on Tuesday in the aftermath of the Reserve Bank of Australia’s (RBA) surprise decision to extend its QE program. 

Economists at TD Securities have long seen AUD/USD as a key barometer for broader G10 FX developments. A sustained move below 0.7590 could be another sign that the market is at the start of a bigger move.

Key quotes

“We are on the lookout for a sustained move below 0.7590. This level corresponds closely with last week’s low (0.7592) and trendline support reaching back to the March 2020 trough; the 55-DMA currently stands a few ticks lower (0.7578). A sustained move lower could help confirm a larger move in the dollar could be underway. The medium-term outlook for AUD may remain positive, but we think a more cautious stance is wise for now.”

“Policymakers surprised investors again overnight, announcing a AUD100 B QE extension. This has the RBA now continuing QE beyond mid-April, when the program was initially set to expire. In its official policy communiqué, the Bank said it expects the absolute earliest it will achieve its inflation and employment goals to be at least 2024. This strongly suggests an exit from YCC is unlikely this year.”