AUD/USD: On the back-foot ahead of RBA as CNH firms to fresh highs

• AUD/USD positioned ahead of the RBA on th backfoot.
• The risk of additional declines remains high for AUD/USD.

AUD/USD has been firmly on the back foot following a free fall in CNH after the Chinese fixed USD/CNY above 6.90 yesterday setting off a wave of risk-off flows. This is all going against the Aussie leading into the Reserve Bank of Australia today having been knocked down from 0.6800 to a low of 0.6748, its weakest point (ex-Jan 2019 flash crash) since March 2009.

In early Asia we had the following: USD/CNH rallies to fresh highs as US Treasury calls China as currency manipulator and USD/CNH continues to move higher, now printing a fresh high of 7.1364. AUD will need a lifeline from the RBA today or face even lower levels, especially should the Dollar eventually find some stability on risk-off flows.

RBA outlook

"Having cut the cash rate at consecutive meetings, the RBA’s language suggests a steady hand at 1.0% and an easing bias, rather than yet another cut," analysts at Westpac explained.

Such a pause seems likely even though the quarterly statement (due Friday) is often a catalyst for policy change. Governor Lowe should provide some guidance on the updated forecasts. It will also be worth noting the language around the US-China trade outlook." 

AUD/USD levels

"The AUD/USD pair attempted a recovery during US trading hours amid prevalent dollar’s weakness, although it met sellers at 0.6782," Valeria Bednarik, the Chief analyst at FXStreet explained:

"The risk of additional declines remains high, according to technical readings in the 4 hours chart, as the 20 SMA accelerated its decline above the current level, now nearing at around 0.6810, while technical indicators remain within negative levels, the RSI resuming its decline near oversold readings. Despite no signs of it, the pair could correct higher due to its continued slide, with the risk of an upward move increasing on a break above 0.6810."