AUD/USD: mixed outlook for the Aussie economy and currency

Currently, AUD/USD is trading at 0.7602, up 0.26% on the day, having posted a daily high at 0.7635 and low at 0.7577.

RBA: On hold, as growth is picking up – HSBC

AUD/USD is trading within a major correction of the 0.7680 sell-off and reached new highs overnight on the back of an upbeat assessment of the Australian economy from the RBA. The RBA left rates on hold at 1.5% but also acknowledged the positive development in commodity prices that provided “a significant boost to Australia’s national income.” this lifted the Aussie until supply came in at 0.7632 given Governor Lowe's cautious optimism and jawboning of the Aussie dollar. Lowe's outlook for the Chinese economy is a concern on a medium term basis and given China absorbs around 35% of Australia exports, Chinese economic performance is critical. 

The key focus for the meantime will stay with rising commodity prices and inflation in the Aussie economy as a driving factor for the price of the Australian dollar. Should inflation move closer to the RBA's target of between 2-3%, this could give rise to speculation that the RBA will be moving towards a more hawkish tone that would subsequently support the Aussie dollar in an otherwise strong greenback environment with the Fed tipped to be tightening in 2017. 

AUD/USD levels

Analysts at Commerzbank remain with a bearish outlook for AUD/USD in the near term. "The market sold off aggressively towards the end of last week and seeing a small rebound currently. The speed of the decline has increased the likelihood of a deeper sell off towards 0.7520 and possibly .7450 (the 38.2% and 50% retracements)," explained the analysts, adding, "Intraday rallies will remain directly offered below 0.7657 the 20-day ma."

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