CROSS ASSET: Oil Spikes On renewed US Strikes, But Sub June Highs

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The AUD/USD had a range overnight of 0.7229-0.7260, Asia is currently trading around 0.7250. The dip toward 0.7200 has proved to be pretty well supported even in the face of a potential resumption of Middle-East hostilities. The market clearly prefers being short US Dollars and the AUD is a standout vehicle to express that, albeit with US yields and Oil higher. Tonight we get US CPI which the market will be keenly watching. On the day, while this 0.7170-0.7200 area continues to provide strong support the AUD bulls will remain in control, looking for the move to build momentum. A move back below here and we could drift back into its previous choppy range. The Australian budget will be the main focus in our session.

• MNI AU - Australian Federal Budget: The Federal budget for FY27 is announced today. There have been significant headlines around what it will include and how it is likely to work against the RBA's goals of reducing demand and inflation. Governor Bullock said following the May decision to hike that capacity pressures mean that governments should be thinking about not adding to them and thus inflation and that help for households “makes it harder to dampen demand”. According to local press reports, increased fuel reserves, a household support payment and business tax relief could be included as well as capital gains tax and negative gearing changes.
• “Australia’s budget will focus on soaring home prices and war-driven inflation, Treasurer Jim Chalmers said. The government is also expected to show a narrower underlying cash deficit than forecast six months ago.” - BBG  
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.7070(AUD442m), 0.7080(AUD471m). Upcoming Close Strikes : 0.7100(AUD1.18b May 13), 0.7200(AUD845m May 13), 0.7350(AUD1.69b May 14) - BBG
• The AUD/USD Average True Range for the last 10 Trading days: 52 Points
• Data/Event: NAB Business Confidence

 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: 95.445 - High May 06
• PRICE: 95.300 @ 16:12 BST May 11
• SUP 1: 95.195 - Low Apr 28
• SUP 2: 95.035 - Low Mar 22
• SUP 3: 94.360 - 1.0% 10-dma envelope

The break back above the 50-dma proved short-lived, with prices fading into the Monday 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 94.360.