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Resilience of industrial commodities and RBA reluctance to highlight new policy options plus underlying USD softness suggest a retest of high 0.72s, in the opinion of analysts at Westpac. The aussie drops 0.41% to trade at 0.7151, from multi-month highs reached at 0.7276 a day before. 

Key quotes

“China’s ongoing recovery continues to underpin demand for industrial commodities. Of course, not all commodities are so buoyant but Westpac’s export-weighted commodity price index does provide substantial backing for the Aussie’s push to as high as 0.7276, its strongest point since Feb 2019.” 

“Global risk appetite remains supportive, with the S&P 500 eking out a record high and MSCI World at highs since Feb. With equities and commodities supportive and positioning moderate, it is hard to argue for substantial AUD reversal. However, the fact that USD bounced sharply simply on some ageing commentary in the FOMC minutes is a reminder that dollar short-covering will happen at times, slowing the AUD/USD up trend.”

“With the RBA in watch and wait mode and VIC virus cases trending lower, AUD should find support on dips towards 0.7100 and may well retest the high 0.72s in coming days.”