The Australian Dollar has largely been in consolidation mode against the greenback since hitting a fresh 2020 high above 0.7000 at the back end of last week. In recent weeks, the AUD has predominantly tracked equity markets, which in turn has seen a sizeable recovery in the currency since the March lows. However, upside could be capped at the 0.7000 level, particularly with the RBA beginning to jawbone the currency with RBA’s Harper noting that a rate back above 0.7000 would be unhelpful. That said, as uncertainties over a second wave pick up, most notably in China, AUD/USD may come under renewed pressure with a closing break below 0.6800 to open up a move towards 0.6650.
In the absence of a fresh negative catalyst with equity markets continuing to recover, we do not rule out a possible retest of the 2020 high at 0.7061, which would likely negate a near-term bearish bias.