Outlook Remains Bearish

An up and down day saw AUD/USD finish slightly lower but off worst levels. The pair rose in the European morning to hit 0.7534 before dropping to 0.7464. Last trades flat at 0.7487.

• The Sydney COVID dynamic will continue to provide interest in the coming days, given the 1-week extension to the related lockdown in the city.
• From a technical perspective AUD/USD found resistance at 0.7599 Tuesday. The sharp sell-off keeps the outlook bearish and the focus is on key support at 0.7445, Jul 2 low. Last week's move lower maintains the price sequence of lower lows and lower highs. Furthemore, moving average studies remain in a bear mode, reinforcing a bearish theme. A break of 0.7445 would open 0.7378, a bear channel base drawn off the Feb 25 high. Firm resistance is at 0.7617.
• An address from RBA Governor Lowe headlines the local economic docket on Thursday. CBA says: "We expect the Governor to emphasise the aim of achieving a tight labour market to encourage a pick‑up in wage and price inflation. In his post‑meeting press conference, the Governor pointed out that while an increase in consumer price inflation to its 2‑3%/yr target is the objective, a pick‑up in wage inflation to around 3%/yr will give the RBA confidence the increase in inflation will be sustained. Only after the RBA achieves its inflation objective, and is confident of maintaining it, will the RBA start to increase the cash rate. We predict the RBA will start a tightening cycle in November 2022."