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Following last week’s move higher, AUD/USD is again languishing below the 0.78 level. Jane Foley, Senior FX Strategist at Rabobank, expects the aussie to pale around these levels as a move above 0.79 is not awaited until the end of 2021.

The RBA is focused on the lack of wage inflation in the labour market  

“The lack of wage inflation provides a succinct reason to expect the RBA to maintain dovish policy settings.”  

“Layered on top, the RBA is likely to be wary about signalling a tolerance of a stronger exchange rate given the backdrop of tensions with China. Over the past year or so exports of goods as varied as wine, barley, oysters and coal have run into difficulties. Grapes are the latest Australian exports that are having problems at the Chinese border.”  

“The June 1 RBA meeting will be closely watched for any hints on forthcoming decisions on whether it will rollover its 3-yr bond benchmark and on its longer date QE target.”

“We continue to expect AUD/USD to languish around current levels in the weeks ahead and don’t forecast a sustained move above 0.79 before the end of the year.”


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