The Australian dollar is on the verge of accelerating its decline as a steadfastly dovish central bank, fears the global economic recovery is losing steam, an unwinding of reflation trades and an extended lockdown in Sydney all take their toll.
The Reserve Bank of Australia's insistence that interest rates are not likely to rise until 2024 suggests it will lag the U.S. Federal Reserve in tightening monetary policy, which should act as a dead weight on the Aussie nS9N2MR024nL2N2OJ1Y4.
Nascent signs of cooling economic growth in China nZRN002C40 and the U.S.nN9N2KB023nL2N2OI25Nare also negative for the Aussie. China's signalling of a possible cut to banks' reserve requirements to support economic growth marks a worrisome shift in this regard nL2N2OK02N.
The disruption to Australia's economy from an extended lockdown in Sydney nL2N2OK01T and the slow vaccination rolloutnL3N2OJ1NLpose further challenges - even as a surge in coronavirus infections in many parts of Asia weighs on sentiment and spurs selling of riskier currencies nL2N2OK00QnL2N2OK35E.
The AUD/USD is testing support at 0.7417, the 23.6% retracement of the 0.5510-0.8007 post-pandemic rally.
A break opens the way to 0.7379, 61.8% of the November-February post-U.S.
election rally, followed by 0.7230, the 76.4% retracement.
AUD/JPY, a barometer for risk sentiment, has support at 80.95, 38.2% of the October-May rise and the 200-day moving average.
A loss of support opens a decline to 79.45.
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