FxWirePro: Where would Aussie dollar likely to head towards in H2’2017 ahead of RBA statements?

For AUDUSD, the impressive rise since May persists, and has a decent chance of pushing above 0.7700 during the next day or two.

From a central bank perspective, the RBA is scheduled to deliver its monetary policy statements on Tuesday, it's among the primary tools the Reserve Bank Board uses to communicate with investors about monetary policy. It contains the outcome of their decision on interest rates and commentary about the economic conditions that influenced their decision. Most importantly, it discusses the economic outlook and offers clues on the outcome of future decisions.

The Aussie central bank continues to keep the faith in the 3% growth story for Australia. In its most recent communication, the RBA acknowledged the likely softness in 1Q GDP, but refrained from reading too much into a weak print.

Instead, the RBA re-iterated its faith that growth would gradually accelerate towards 3% in coming years. As long as the RBA can attribute quarter-to-quarter volatility in GDP outcomes to unusual weather (higher than is usual rainfall in Eastern Australia in 1Q, Cyclone Debbie in 2Q), RBA neutrality is likely to persist for sometime yet. This suggests that domestic monetary policy is unlikely to provide much near-term support for a lower AUD.

AUDUSD medium term perspectives: The resilience of US equity markets to the distractions of the Trump administration is a positive backdrop for risk-sensitive AUD. Chinese markets are of course less helpful as the deleveraging push continues, but the uptrend in steel prices suggests the potential for recovery in iron ore prices. The rebound in Australian job creation keeps RBA rate cut talk at bay. But multi-month, we expect the ongoing rise in US interest rates to chip away at AUDUSD, leaving it around 0.73 by Q3.

The medium term consolidation phase is intact, as the short-term framework highlights the risk of a bearish resolution against the 0.7650/.7750 zone (76.4% retrace, March peak, April ’16 trendline). Failures would allow for a retest of the important 0.7300 support area.

Currency Strength Index: FxWirePro's hourly AUD spot index is struggling at 6 levels (which is neutral), while hourly USD spot index was at shy above -50 (bearish) at 06:44 GMT. For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex.

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