Recovers From Lows, COVID Remains Headwind

After dropping as low as 0.7331 in the European morning AUD/USD recovered to highs of 0.7391 before moving in a range into the close. The pair last trades down 4 pips at 0.7381.

• The local COVID situation is expected to remain a headwind for AUD, the latest development is a delay until 2022 for a shipment of 51m doses of Novavax vaccine. CBA says: "we think the Covid‑19 situation in Australia will remain a firm headwind to AUD in the near term. The negative spread between Australia and US 10‑year bond yields is an additional headwind to AUD."
• From a technical perspective the AUD/USD outlook is bearish. This follows the recent breach of a channel drawn from the Feb 25 high and despite the fact that price bounced back into the channel area, the move lower marks an important short-term technical break. Scope is for weakness towards 0.7235 next, a 1.236 projection of the Feb 25 -Apr 1 - May 10 price swing. On the upside, initial resistance to watch is at 0.7429, Jul 19 high.
• There is a lack of domestic risk events slated on Tuesday. Late in the Sydney evening we will see RBA Deputy Governor Debelle speak on "Outcomes of the 3-year review of the FX Global Code" at the FX Markets U.S. Conference 2021, and participants will also digest weekly consumer confidence data.