Recovers Some Lost Ground Post-FOMC

A weaker greenback in the wake of the FOMC rate announcement saw AUD/USD recover its earlier losses and rise to highs of 0.7381, last down 2 pips on the session at 0.7375. The pair had been gradually trending lower throughout the session pre-FOMC, lows for the day at 0.7317.

• The local COVID situation will continue to dominate domestic news flow. While Victoria has reported 7 new cases, the situation in Sydney remains more serious with parts of western Sydney facing even tougher lockdowns. Australian Treasurer Frydenberg said the fate of the economy for the rest of this year depends on how quickly NSW can curb Covid-19 case numbers and come out of lockdown.
• From a technical perspective there was broad USD weakness following the Fed decision, but the ensuing rally in AUD/USD stopped short of challenging any near-term resistance levels. This keeps the outlook bearish after the recent breach of a channel drawn from the Feb 25 high. Despite the fact that price is back inside the channel area, the move lower marks an important technical break, signalling potential for a move 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.
• It is a thin domestic docket today with import/export price index the only release on the schedule.