The recent breakout higher in EURAUD has seen the market blowing through several key levels. The rally has recently stalled into a retest of the broken bull channel and the 1.6163 level resistance. However, with around 75% of the retail market currently short, there is plenty of room for the current rally to continue. Additionally, the risks around the COVID backdrop are skewed towards greater downside for the higher-beta AUD meaning that any deterioration in Omicron news flow is likely to send the pair higher. Bulls can look for a breakout above 1.6163 targeting a run back up to the 1.6419 highs.

Keep An Eye On

The big focus will be the RBA meeting later tonight. Following a slew of better-than-expected data recently, there are upside risks going into the meeting. However, given the fresh uncertainty over Omicron and the high likelihood of fresh Aussie lockdowns on the horizon, it seems reasonable to expect the RBA to remain on hold at this point. Consequently, the focus will be on the guidance . If the RBA sounds overly alarmed by Omicron, this will weigh on AUD near term.