Although AUD/USD bounces off a yearly low, snapping a four-day downtrend, Morgan Stanley stays bearish on the Aussie currency pair, targeting 0.7000 with a stop-loss point of 0.7800.
Markets are pricing in excessive RBA hawkishness, with liftoff now fully priced for July 2022, compared to RBA guidance for 2024.
Higher US real yields and tighter breakevens suggest a weaker AUD. COVID-19 risks remain asymmetrically negative in Australia, particularly with the more transmissible Delta variant.
Rising concerns about global growth (as evident in the distribution of equity returns) should be AUD/USD-negative
That being said, AUD/USD fades recovery moves by the press time, around 0.7330, of early Wednesday.
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