AUD/USD outlook

Yesterday's sharp reversal suggests further corrective AUD/USD behaviour today towards 0.7200. Yesterday's outside reversal keeps AUD/NZD downside in view, next target is 1.0850.

"Eventual resumption of the strong US dollar trend should weigh on the AUD during the next few months. The next major downside target is 0.7000 and then 0.6700. The RBA will probably remain on hold (albeit with easing risk), while the RBNZ is currently in easing mode. Expected RBA vs RBNZ direction thus favours AUD/NZD upside over the medium term to the 1.14 area", says Westpac.

The 2yr AU swap yeilds should open around 1.99% while the 10yr should open around 2.95%. The 2yr looks vulnerable to breaking below the 1.90% area in coming months, while the 10yr continues to follow the US 10yr, a break below 2.80% looking likely.