AUD/USD still headed for 0.81 by year-end despite RBA surprise today

HSBC argues to look past the RBA surprise decision today

The firm says that while it was a surprise that the RBA announced a QE extension today, it simply “mirrors similar commitments by other G-10 central banks, including the Fed, and should therefore not be a significant long-term driver of the currency”.

Adding that they still see AUD/USD advancing to 0.81 by the end of the year amid improving global growth prospects and higher commodity prices in general.

While the RBA did surprise somewhat earlier today, it wasn’t so much a major one as they are largely seen as bringing forward the decision to extend QE.

Expectations were quite even that they could have maintained the status quo or err on the side of caution in the months ahead, so this was very much the RBA taking the latter decision and trying to get ahead of things – just in case.

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The reiteration that rates will not change until 2024 at least all but helps to anchor yields lower but I would expect them to phase out QE some time next year (or if things go really well, maybe by the end of this year).

As for the argument by HSBC, I wouldn’t be too fixated on the end-target for now. The latest pullback (dollar short squeeze also part of it) is seeing AUD/USD fall back towards 0.7600 and below recent support from the 23.6 retracement level @ 0.7624:

AUD/USD D1 02-02

That may see price ease towards 0.7500 next with the 100-day moving average (red line) @ 0.7392 going to be a key level to watch in case of a deeper pullback.

That will make for an attractive dip buying opportunity in the pair with the potential to head back towards the year’s highs just above 0.7800 as the first target. Then, perhaps we can start talking about 0.8100 subject to the market landscape at the time.