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AUD/USD looks on track to make a run at 0.7295 as the US dollar bear trend continues though the Australian economy appears to be deteriorating, according to economists at Westpac.

Key quotes

“DXY’s 7.5% depreciation since late-May is eye-catching but far from exceptional, much larger uninterrupted trend declines of 12-15% commonplace over the last 25 years. A shift to average inflation targeting at the Sep FOMC and Nov US election uncertainty likely to sustain the USD bear trend into year’s end.”

“Victoria’s new Covid-19 case count remains very high, reinforcing the introduction of stricter activity restrictions including a daily curfew in Melbourne and enforced closure of many businesses that had traded through the Q2 restrictions. PM Morrison says this could cut national GDP by 2.5ppt in Q3 and push the peak unemployment rate to around 10% rather than 9.25% in the recent statement.”

“Australia’s A$8.2 billion surplus in June was its 30th consecutive monthly surplus. Commodity revenues are very strong but services are playing a role too. Tourism abroad is Australia’s #1 import but will be effectively unavailable for months to come, keeping more A$ at home than are lost through the lack of foreign tourism and lower education exports.”

“USD weakness and bounce in both industrial commodities and precious metals suggests a test of resistance at 0.7295 though domestic economy continues to weaken.”