AUD outlook

Today's highlight is the RBA meeting. It stood pat, as expected. AUD/USD is likely to stand in a 0.7070-0.7200 range, with the RBA outcome today the main determinant of near term direction.

"Eventual resumption of the strong US dollar trend should weigh on the AUD during the next few months. The next major downside target is 0.7000, beyond that 0.6700. Yesterday's sharp reversal threatens 1.0600 above. The RBA and dairy auction are key risks today, and if they move in the direction expected, should boost the cross", says Westpac.

Post-FOMC, the 2yr AU swap yields should open around 1.92% while the 10yr should open around 2.90%. The 2yr looks vulnerable to breaking below the 1.90% area. The 10yr continues to follow the US 10yr, a break below 2.80% looking likely.

"As expected, the RBA stood on hold in November, and the RBNZ is likely to ease in December. Expected RBA vs RBNZ direction thus favours AUD/NZD upside over the next few months to the 1.10 area. However, before that, a further decline as far as 1.03 is possible; relative commodities a drag", added Westpac.