Lockdown Worries Front And Centre

Spot AUD/USD finished flat on Thursday, the pair hit lows of 0.7723 and highs of 0.7758 but ultimately failed to capitalize on moves in either direction. The pair last down 4 pips at 0.7743.

• The state of Victoria imposed a seven day lockdown yesterday to address a jump in the number of cases. The lockdown in the second most populous state has fueled speculation that a fiscal response could be required with some estimating it could shave up to 0.2ppts off GDP. CBA are more positive: "AUD has been largely unscathed from the most recent Covid‑19 outbreak in Victoria. Nevertheless, the resumption of a 7‑day lockdown in Victoria serves as a reminder that downside economic risks will persist until the virus is controlled."
• From a technical perspective AUD/USD continues to trade in a range. A bearish theme dominates though following the recent move lower to 0.7688 on May 13. A firm support zone has been defined at 0.7688-75, the latter is the May 4 low. Clearance of this support would strengthen a bearish case and signal scope for a deeper pullback towards 0.7586, the Apr 13 low. For bulls, a breach of 0.7813, May 18 high would be positive and open 0.7891, high May 10.
• There are no domestic releases on the docket on Friday.