Strength has been tempered for the aussie as the Australian economy deals with covid lockdowns. China’s concerns also weigh in the near-term. Confirmed lockdown exits and recovery in activity are set to promote AUD buying, according to economists at CIBC Capital Markets.
Consolidation at low side of recent ranges
“Covid lockdowns in major states of Australia are having a marked and deep impact on domestic activity. The ending of restrictions is not in sight, with the prospects of an anticipated swift recovery – favoured by the RBA, requiring ongoing monetary and fiscal policy support.”
“Once lockdowns end, and on assumption of no systemic risks from Evergrande developing, we expect AUD/USD holding inside the wide 0.70-0.80 range observed over the last year.”
“We see very strong support in the range of 0.70-0.71 and expect that to continue to be the low end of the range in coming months before eventual recovery in 2022.”