AUD Higher Over European Morning
The Australian Dollar has been a little firmer over the European morning on Tuesday following the July RBA meeting held overnight. While monetary policy was held unchanged, in line with expectations, there was some noteworthy action at the meeting with Governor Lowe noting that from September, the RBA will reduce its weekly asset purchase program from $AUD 5 billion to $AUD 4 billion.
2024 Still Seen As Rate Hike Target
AUD was well bid in response to news of the tapering with the market now bringing forward its rate hike projections. While the RBA has previously stated that it does not see any lift in rates until 2024 at the earliest, this time around the RBA noted that while that is still the case, a rate hike will be “dependent on the data not the date”. However, despite the hawkish interpretations of this message, Lowe went on to say: "The central scenario remains that the condition for a lift in the cash rate will not be met until 2024… it is based on inflation outcomes, not the calendar”, adding: "We're certainly not hinting at rate increases in 2023.”
Inflation Still An Issue
Lowe went on to elaborate on the reasoning behind the bank’s central view on rates, saying: Wage growth in Australia had slowed by more than it had in most other countries, even before the pandemic, and we had a particularly large response in wages during the pandemic as well.” Lowe continues, explaining that: "So, even though the real economy in Australia has been much better than in almost any other Western country, the outcomes for wages and inflation have not been better and we're further away from where we should be on both those key variables."
Economic Outlook Stronger Than Expected
Expectations ahead of the meeting were largely muted as a result of the fresh lockdowns announced in Australia over the last fortnight as a result of rising delta variant numbers. However, despite these developments, Lowe noted that the "The economic recovery in Australia is stronger than earlier expected and is forecast to continue.”
Technical Views
AUDUSD
The recent break lower in the Aussie was accompanied by bullish divergence in both the RSI and MACD, which has now turned positive. Following the bullish engulfing candle at lows, price has since broken higher though is currently stalling around the .7564 level. Bulls will need to see a break above the recent .7617 highs to affect a change in sentiment. Below .7564, .7413 is the next downside target.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.