AUD: AUD/USD - Consolidates Around 0.6900, Not Much Of A Bounce

The AUD/USD had a range overnight of 0.7155-0.7176, Asia is currently trading around 0.7170. The AUD continues to hold onto its gains from earlier in the week and is drifting sideways as the market looks for a resolution to the conflict. The Middle-East backdrop remains as fluid as ever, with both parties signaling a willingness to find a framework to end the war. The Israeli aggression in Lebanon will unfortunately not be helping, this is something Iran has said it will not back down from. While this protracted negotiation plays out the Straits remain closed and the world continues to live off reserves, with last week's SPR release the second highest on record. These inventories are finite and the pressure to get a deal done continues to build. On the day, I suspect sellers will return toward 0.7180-0.7210 but it looks like the wider 0.7080-0.7280 range will probably contain us until we get clarity on how this conflict moves forward.  

• MNI - AU April CPI data is released today and with the RBA monitoring how broadly and quickly higher input costs are being passed onto customers the data will be watched closely, especially the underlying trimmed mean.
• Bloomberg - “A lot of RBA hawkishness and positive risk news already in the price,” wrote MUFG analysts in a note. “RBA hiking done for now”. “Any terms of trade benefit from the rise in natural gas prices for Australia could well be offset by weaker global growth, in particular in China”
• “US oil exports will “soon be firmly constrained” by inventory levels that “already look low,” according to Sparta’s Neil Crosby.” - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.7050(AUD595m), 0.7200(AUD731m). Upcoming Close Strikes :  0.7050(AUD650m May 29), 0.7120(AUD815m May 29) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 47 Points
• Data/Event: Westpac Leading Index, CPI, RBA’s Andrew Hauser. speak at BOJ-IMES Conference,  RBA’s Carolyn Hewson speaks at Adelaide University 

Fig 1: AUD/USD spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

• RES 3: 95.900 - High Jan 8 and a key short-term resistance  
• RES 2: 95.653 - 23.6% retracement Oct - Mar Downleg (cont)
• RES 1: 95.500 - High May 24, 2026
• PRICE: 95.415 @ 16:07 BST May 26
• SUP 1: 95.195 - Low Apr 28
• SUP 2: 95.035 - Low Mar 22
• SUP 3: 94.412 - 1.0% 10-dma envelope

The break back above the 50-dma proved short-lived, with prices fading again into the weekly close. Any additional progress above the 50-dma opens 95.653, the 23.6% retracement for the downleg posted off the October high on the continuation contract. While the bear mode set-up in MA studies is highlighting a dominant downtrend, moves this week are highlighting the risk of a near-term correction higher. Any weakness through year-to-date lows at 95.560 would prompt further downside from here, opening vol-band support into 94.412.

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