Rangebound

AUD struggled for decisive direction, oscillating between gains and minor losses, finally closing the day around 10 pips higher at 0.7842. The pair last down around 5 pips at 0.7837.

• AUD could face some headwinds after reports that the Chinese government has given orders to at least small LNG importers to boycott purchases from Australia. It is thought the impact will be small because the majority of Chinese LNG purchases come from larger state owned firms who have not yet received the orders. Nonetheless this is another sign of tensions between the two countries.
• The budget was not a market mover but did paint a positive fiscal picture, CBA says: "The Budget position for 2020/21 has improved significantly – thanks to Australia's solid economic recovery and strong commodity prices. The 2020/21 deficit is now estimated at $A161bn or 7.8% of GDP (MYEFO estimate: $A198bn or 9.9% of GDP). The government's ongoing large budget deficits, and accumulation of debt, does not change our outlook for the AUD/USD. Commodity prices are very high and underpin our prediction AUD/USD will appreciate further over 2021."
• From a technical perspective AUD/USD traded higher Monday but stalled at the session high. The pair has cleared the April highs and this sets the stage for a climb toward the 76.4% retracement of the February - April downtick at 0.7895. A break here would strengthen bullish conditions and point the needle toward the year's best levels printed in late February at 0.8007. Key short-term support has been defined at 0.7675, May 4 low.
• No domestic economic data on the docket today, markets look ahead to consumer inflation expectations on Thursday and then the RBA Minutes next week.