AUD: a neutral stance overall, watch DXY to soar 2-4% - TDS

Analysts at TD Securities explained that the 0.7450/0.7480 breakdown in AUD/USD after the May 5th SoMP acts as crucial resistance. 

Key Quotes:

"Through this, we think a rally towards 0.7350/0.7400 act as a key reassessment area for the market. This broadly coincides with the 50% Fibo from April’s highs. From there, this could open the door for AUD to resume its decline towards 0.7000, and cannot rule out an overshoot to the lows near 0.6830. This, we think, will more fully complete the bearish trend in AUDUSD.

At that point we would look to adopt a more neutral stance on the AUD overall. Anything further would require a much more protracted extension in the USD to the topside; instead, we expect the DXY to appreciate by 2-4% over the next couple of quarters. 

Recent months have shown the AUDNZD cross to be a very difficult pair to trade from the long side and it is not for the faint-hearted. But, for those with a high tolerance for risk, Aussie and kiwi near-term risks should bias the cross higher. We expect the RBNZ to cut at its June 9th meeting and currently, this is only about 30% is priced-in. 

On the charts, we would initially look for topside extension towards 1.09/1.10 area. We would set a tight stop at 1.0590, however, as some market participants have branded this cross a “widow maker.“