April 30, 2021 14:43:14

Next week sees the RBA meet on May 4 followed by the Statement on Monetary Policy released on May 7. Recently, the meetings linked to the Statements have seen policy changes but this time around, all policy measures are expected to remain unchanged.

While some central banks like the Bank of Canada have started on the road to normalisation, the RBA is expected to start a third round of QE in August in order to ultimately bring unemployment to around 4%. So any clues and shift in tone towards this change will be the focus and weigh on AUD, with the latest inflation report revealing that price pressures remain subdued amid ongoing virus concerns around the region. Even though there might not be much to grab headlines, there are a couple of AUD crosses worth watching.

AUD/USD stuttering near the highs

This major is finding it increasingly difficult to break above solid resistance at 0.7849, even with rampant commodity prices and buoyant risk markets. If these turn negative, the 50-day moving average offers first support at 0.7718, with the 100-day SMA just below and ahead of the long-term trendline around 0.7640. On the flip side if bulls can break clear, they will target cycle highs at 0.80 and then the January 2018 peak at 0.8135.

EUR/AUD forming a base?

After hitting highs at 1.6827 in October last year, EUR/AUD looks to be forming a base around 1.54. Prices have bounced off cycle lows at 1.5252 and the pair has traded sideways since that time. The down trendline from those highs has been pierced but not conclusively broken so bulls will need to push higher through this month’s high at 1.5672. Momentum indicators are only modestly bullish which means the long-term trend for lower prices will kick in if we see the pair go below 1.54.