Softer But Outlook Remains Bullish

Another session of gains for the greenback saw AUD/USD soften on Wednesday, the pair dropping from Asia-Pac highs of 0.7404 to lows of 0.7345 in the US session, the pair recovered to close at 0.7368, last down 1 pip on the session.

• From a technical perspective AUD/USD is off its recent highs. The RBA decision Tuesday worked against the previous bullish tone, pressing the rate through the 50-day EMA support. The near-term outlook remains bullish and dips are considered corrective. The focus is on 0.7503, Jul 13 high and remains a key near-term hurdle for bulls. Key support to watch is 0.7222, Aug 27 low, a break would signal a resumption of bearish activity. Initial support is at 0.7337, the 20-day EMA.
• The market will continue to watch the local COVID-19 dynamic, NSW Premier Berejiklian will today unveil a road map out of lockdown, with some regional areas expected to be released from this weekend.
• CBA sees the FOMC outlook and Chinese economic activity as having more of an influence: "The outlook for FOMC tapering and concerns about the global economic impact of the delta variant can continue to drive AUD in the near term. Chinese economic activity is also worth monitoring closely because slowing Chinese growth it is a major downside risk to AUD. We are watching closely whether the expected increase in China's local government bonds to finance infrastructure spending comes through."
• A limited economic docket on Thursday, markets look ahead to HPI data and NAB business survey next week.