Societe Generale Research discusses AUD tactical outlook after the RBA's back-to-back rate cut this week.
"The RBA rate was much as expected given the lack of inflation, soft data, global trends and the dovish tone we’ve had from recent RBA comments. Another cut is seen by the market as likely in the months ahead but intriguingly, the chances of rates falling twice more are receding in the market’s mind," SocGen notes.
"The relative Australian/US real yield differential and AUD/USD have moved together more consistently in the post-GFC era than most rate/fx pairs and yields are showing signs of bottoming. Whether this can signal a turn higher for AUD/USD depends hugely on whether we will see YUSD/CNY settle into a range for a decent length of time, but in the short term, AUD has potential for short-covering and CAD has potential to benefit by association," SocGen adds.