AUD/USD should find buyers on dips towards 0.7400 - Westpac

Sean Callow, Research Analyst at Westpac, suggests that the firmer global risk environment and solid US domestic data have helped US yields grind higher, supporting USD while still aiding AUD on some crosses (e.g. JPY).

Key Quotes

“Risks of a 2 Aug RBA rate cut (about 2/3 priced) should also help cap AUD/USD on any renewed probes towards a 0.76 handle. But it is hard to see any major change in RBA pricing before Australia’s 27 July CPI data.

Meanwhile, our basket of Australia’s key commodity prices (WCFIAECI on Bloomberg) is very close to a high since Sep 2014, albeit facing a little pressure from the rising USD.

AUD/USD should thus find buyers on dips towards 0.7400 in the countdown to the CPI. But if Australia’s core CPI prints on the low side as we expect then amid a firm USD environment, AUD/USD should struggle, risking 0.7350. The 200dma currently at 0.7319 should hold for now.”