Australian Dollar, AUD / USD, RBA, Fed, Technical Analysis – Market Warning
- The Australian dollar had made little movement in the RBA, focusing on market sentiment
- The RBA does not consider extending the term financing option, the consumer price index will increase in the near future
- AUD / USD trading with a slight bullish undertone, but recent price behavior neutral
The Australian dollar was quite subdued after the May RBA’s monetary policy announcement went awry. As expected, the cash rate target and the 3-year government bond yield targets remained unchanged at 0.1%. What seemed to be giving Aussie a little life was the central bank’s update that it was not considering a further extension of the term funding facility.
Members also do not see the conditions for an increase in loan reference rates until 2024 at the earliest. In July, the central bank will consider whether to convert the 3-year interest rate target into a November 2024 bond from April of the same year. The RBA also left the door open for further bond purchases to meet its inflation and jobs target.
Additional RBA highlights (comment reported by Bloomberg):
- Improved GDP to 4.75% in 2021, then slowed to 3.5% the following year
- The unemployment rate was about 5% at the end of 2021, falling to 4.5% at the end of 2022
- The CPI is based on 1.5% this year, rising to 2% in mid-2023
- The CPI is temporarily above 3% in the quarter of June 2021
Despite the growth of the RBA, the Aussie’s victory was maintained by the fact that the central bank left the doors open for further easing if necessary. Last week’s soft first quarter Australian CPI report may already have been encourage those expectations. At the same time, the central bank underestimated the inflation woes, similar to what the Federal Reserve has done.
With this in mind, the sensitive Australian dollar is likely to turn its attention to risk appetite in the coming hours and for the rest of the week. Still, the dovish Fed has underestimated the expectation of premature narrowing, as repeated by President Jerome Powell over the past 24 hours. As such, Australians may remain in a rosy state given the healthy stock market corrections that they have room to weaken.
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15-minute diagram of Aussie RBA response
Australian dollar technical analysis
From a technical point of view, the short-term outlook for the Australian dollar appears neutral and with a slightly rising undertone. April AUD /USD broke above the pattern of the declining triangle pattern, opening the door to continue the prevailing uptrend from last year’s Covid slump. However, prices have recently consolidated between the 0.7687 – 0.7702 reference zone and the 0.7820 – 0.7849 turning zone. A 100-period simple moving average can keep the focus up. Keep an eye out for signs of divergence in the RSI, which is a sign of fading momentum.
AUD / USD 4-hour chart
– Written by Daniel Dubrovsky Strategist to DailyFX.com
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