Treading Water Ahead Of RBA

The greenback rose on Friday which put AUD/USD under pressure, though USD lost sound ground into the close which helped the pair regain some poise, the rate finished at 0.7712 after falling as low as 0.7677. The pair last flat at 0.7712.

• CBA believes AUD could come under pressure in the near term: "AUD/USD risks underperforming this week. On Tuesday, we expect the RBA will reiterate it expects the cash rate to remain at record lows until "2024 at the earliest". Increasingly, the RBA is more dovish than many other central banks. The RBA will update its policy guidance, and we expect it to sound more hawkish, but not until July. In the meantime, the RBA's current stance is a headwind to AUD. Q1 21 GDP could also lead to a spike in intra‑day AUD vol. on Wednesday. Our preliminary forecast is for a 1.2%/qtr lift in Q1 21 GDP."
• From a technical perspective AUD/USD traded weaker into the Friday close. A bearish theme dominates following the recent move lower to 0.7688 on May 13. Firm support has been defined at 0.7675, the May 4 low. Clearance of this support would strengthen a bearish case and signal scope for a deeper pullback towards 0.7586, the Apr 13 low. For bulls, a breach of 0.7813, May 18 high would be positive and open 0.7891, high May 10.
• Domestically, private sector credit and the monthly Melbourne Institute inflation expectations are due to be released today, although more focus will fall on Tuesday's RBA decision (N.B. it will be the July gathering that provides the key decisions surrounding the Bank's bond buying and yield targeting schemes) and Wednesday's Q1 GDP reading.