The Australian currency is delicately poised as markets position for tomorrow’s RBA meeting, which strategists believe could spark further volatility.

Analysts broadly expect the RBA will not extend its yield curve target beyond April 2024 but there is less certainty surrounding the next phase of its quantitative easing program.
Given the yield target decision is priced in at April 2024, we think the devil will be in the detail of the QE program, said ANZ FX strategist John Bromhead.
ANZ strategists, among others, have suggested the third phase of QE could include $5 billion weekly bond purchases with a flexible lever attached, allowing the RBA to taper in response to economic developments without causing too much volatility.
We dont think there will be a tapering of quantity, but where the rubber hits the road will be how explicit they are with the review process and how often they do it, Mr Bromhead said.
If the RBA says it will review the bond-buying frequency in the next couple of months, the market could view that as a soft taper, which would be a positive for the Aussie dollar.
Commonwealth Bank believes the dollars recent down trend will continue in the absence of a substantial taper announcement tomorrow.
COVID-19 lockdowns have complicated the outlook for the bond-purchasing program the risk is the RBA adopts a flexible approach to tapering it, wrote CBA currency strategist Kim Mundy.
If the RBA tapers by $50 billion, the Australian dollar could jump a few cents this week. It could also lift if the RBA softens its forward guidance … on the cash rate.
The Australian currency has struggled in recent weeks due to a resurgent greenback, which has rallied on forecasts that the Federal Reserve will increase interest rates twice by 2023.
The aftermath has been enough to drag Australias currency lower despite commodity prices remaining elevated and the country recording its 41st consecutive trade surplus in May, and remaining on track to add to that streak in June.
These conditions had many strategists predicting the Australian dollar would break through US80¢ in the coming months, but other factors are now at play, meaning analysts have adjusted their forecasts.
Youve got to wonder whether the Aussie has a mark against it in terms of its export prospects given the attitude China has towards Australia, Mr Callow said.
If the dollar can barely get past US75¢ with iron ore prices at current levels, it makes you question how much higher the Aussie could go, particularly given China will reduce its dependence on Australian exports going forward.
This backdrop, along with Westpacs prediction that the RBAs interest rate rise will come in early 2023, led the bank to cut its end-of-year forecast for the Australian dollar from US82¢ to US80¢.
This was replicated by ANZ, whose end-of-year prediction was also trimmed down to US80¢, noting that the path to the Aussie dollars appreciation will be more modest.
NAB has backed its optimistic forecast that the Aussie dollar will reach US82¢ by years end, emphasising price action over the past few days could signal a trend reversal.
The bottom line is, the Aussie still looks extremely undervalued relative to fundamental metrics such as commodity prices and risk sentiment, said the banks head of FX strategy, Ray Attrill.