Hits Lowest Since December 2020

AUD/USD continued to weaken on Thursday despite a lower greenback. The pair fell to intraday lows of 0.7417, the lowest since December 2020, before recovering slightly into the close – the rate last on the screens at 0.7432.

• Some of the weakness is attributed to the speech from RBA Governor Lowe yesterday. CBA outlines Lowe's dovish leanings in the speech: "RBA Governor Philip Lowe continued to push back against financial market expectations for RBA rate hikes next year. Lowe emphasised again he does not expect the conditions to be met that would see the RBA lift the cash rate until 2024. Specifically, Governor Lowe suggested it will be a few years still before wage growth increases back above 3% because of supply related issues (namely the rise in the labour force participation and the trend rise in underemployment)."
• Iron ore was also under pressure on Thursday, there were several comments addressing higher commodity prices and tools to help companies deal with them after the State Council meeting. A cut in the RRR was one option discussed. The government also continued to roll out measures to reduce emissions.
• Local COVID-19 matters also continue to weigh on the outlook amid chatter of another extension of the lockdown in Sydney and surrounding areas. NSW reported 38 cases on Thursday, the highest number since the first wave.
• From a technical perspective AUD/USD is approaching key short-term support. The pair found resistance at 0.7599 Tuesday. The outlook remains bearish and the focus is on 0.7376, the bear channel base drawn off the Feb 25 high. The recent move lower maintains the price sequence of lower lows and lower highs for the pair. Furthermore, moving average studies remain in a bear mode. Firm resistance is at 0.7617, Jun 25 high.