AUD: AUD/USD - Look For A Bounce Back Toward 0.7100-0.7150 To Be Faded Initially

The AUD/USD has had a range today of 0.7034-0.7059 in the Asia- Pac session, it is currently trading around 0.7050, +0.05%. The AUD made a weak attempt yesterday to retrace some of Friday's break lower but remains heavy below 0.7100 for now. The Middle-East backdrop remains as fluid as ever, with Israel and Iran apparently agreeing to ease strikes against each other, though a report from the local TV station N12 stating that strikes in Lebanon would continue at full force makes you wonder how long that will last. On the day, I suspect this break below 0.7080-0.7100 should now see rallies faded in the short-term at least. The first resistance is back toward the 0.7085-0.7115 area and a leveraged market that is still long might use that area to lighten up initially. The US Dollar has broken its downtrend therefore while below 0.7100-0.7150 I would now be looking for the pair to drift back toward the 0.6850-0.6950 support where I think we could see some demand return. 

• "NAB: NO LONGER EXPECT RBA TO HIKE BY 25BP IN AUG. NEXT MOVE IN CASH RATE LIKELY TO BE DOWN, TIMING UNCERTAIN. NOW SEE CASH RATE ENDING 2027 AT 3.6%" - BBG
• MNI - NAB Business Survey Signals Upside Inflation, Downside Growth Risks: There seemed some stabilisation in the private sector in May with NAB business conditions stable at +3 and confidence improving substantially to -14 from -23. However, Q2 averages are signalling growth slowed in the quarter. Price/cost increases moderated from April but remained elevated compared to pre-Iran War rates and are signalling upside risks to Q2 CPI. The RBA remains alert to signs of a greater or faster pass through of higher costs to consumers and while the NAB survey shows some easing in the size of price rises they remain inconsistent with the inflation target.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.7050(AUD712m). Upcoming Close Strikes :  0.7050(AUD651m May 29), 0.7250(AUD655m June 11) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 51 Points

Fig 1: AUD/USD spot Daily Chart

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