More Lockdowns Cloud Outlook

Concern over the highly contagious Delta variant of the coronavirus undermined high-beta on Tuesday, AUD was one of the worst G10 performers and AUD/USD dropped back through its 200-DMA. The rate last changes hands at 0.7512 having declined some 0.73% on the session.

• Brisbane is the latest city to impose a lockdown, joining Perth, Sydney and Darwin; around half of the population are now in lockdown. CBA says the lockdowns will likely weigh on AUD: "The lockdowns mean the odds are now lower the Reserve Bank of Australia cuts its QE buying by half at its 6 July meeting as we forecast. Without a step in the direction of an exit from unconventional monetary policy, AUD is unlikely to regain losses sustained since the FOMC meeting on 17 June. AUD will remain heavy for the next few weeks at least in our view."
• From a technical perspective last week's AUD/USD gains are considered a correction. The outlook remains bearish following recent weakness that resulted in a break below key support at 0.7532 Apr 1 low and price is also tested the 200-dma. The move lower confirmed a resumption of the reversal that occurred Feb 25 and signals scope for a deeper pullback towards 0.7462 next, the Dec 21, 2020 low. Initial firm resistance is unchanged at 0.7645, the Jun 17 high.
• Private sector credit data headlines the local docket on Wednesday, although the release of the official Chinese PMI surveys may provide more impetus.