The Australian dollar made another attempt to storm the 72nd figure. This time, the efforts of buyers of the AUD/USD pair look more successful – the price has been staying above the 0.7200 mark for the second day, demonstrating the reliability of a bullish sentiment. But the upward momentum is a result of the US dollar's weakness: the aussie remains driven, given the prevailing fundamental picture. However, the Australian dollar made its own contribution to the development of today's upward trend: the minutes of the last meeting of the Reserve Bank of Australia turned out to be quite good, although predictable and somewhat outdated.
The main message of the Australian minutes is that the central bank maintains a wait-and-see attitude regarding the prospects for monetary policy. The RBA sees no need to soften the parameters of monetary policy, despite the COVID-19 outbreak in Victoria and conflicting dynamics in key macroeconomic indicators. At the same time, members of the RBA continue to insist that the economic downturn was "not as serious as previously expected." The text of the document states that "recovery is in full swing in most of Australia." The central bank also welcomed the government's steps to help the unemployed. Let me remind you that at the end of July, the Australian Prime Minister announced that the JobKeeper and JobSeeker programs would be extended after September. The intrigue around this issue persisted for several weeks, but in the end, the cabinet of ministers decided to extend aid to the unemployed Australians. But now the subsidies will be paid at a reduced rate and on stricter criteria - so that support is provided only to those who, according to the government, really need help. Nevertheless, members of the RBA positively perceived this decision, given the rise in unemployment in the country.
In general, the minutes of the RBA's August meeting were more optimistic than the central bank's quarterly report and subsequent comments from its representatives. But traders actually ignored the RBA's optimism – the minutes only made it possible for the aussie to stay afloat and follow the US currency, which still shows weakness. In other words, today's release did not plunge the aussie, but also did not play a key role in its appreciation.
The fact is that the minutes itself is outdated, as it reflects the situation and the mood of the central bank's members two weeks ago. Since then, more recent macroeconomic data have been published (in particular, on the labor market) and more recent comments have been made.
For example, at the end of last week, the rhetoric of RBA Governor Philip Lowe was no longer as optimistic in the Australian parliament. According to him, the central bank revised its forecasts downward - according to the updated data, the second quarter will demonstrate a 7% decline in the country's GDP, which is "the largest decline in many decades." Lowe also assessed the inflationary prospects. According to him, inflation is unlikely to return to the 2 percent target range within "at least three years." This means that interest rates will remain at the current level during this period of time, and if they are revised, it will only be downward. In addition, Lowe complained that Australian consumers have changed their attitude to spending - households and businesses have become more cautious in terms of consumption and investment. He also reiterated his forecast that the unemployment rate will only grow in the coming months, and will reach 10 percent by the end of the year.
All this suggests that many of the theses of the latest RBA minutes are outdated. Therefore, traders only took this document into account, but de facto ignored it. The AUD/USD pair still follows the US currency, which reacts to the strengthening of anti-Chinese rhetoric from US President Donald Trump and to the strengthening of the rating positions of Trump himself, who until recently was considered an outsider in the presidential race. The expansion of sanctions against the Chinese company Huawei, possible sanctions against Alibaba and the disruption of US-Chinese online negotiations are putting pressure on the greenback. At the same time, Trump retains the chances of remaining in the White House following the results of the November vote – the latest opinion polls suggest that the current president has significantly reduced the gap from Biden and actually offset it in key states. Against this background, the dollar index continued its downward movement, heading to the middle of the 92nd figure: the last time this indicator was at such a low was back in April 2018.
Summing up the above, we can conclude: the Australian dollar is using the RBA's wait-and-see attitude and blindly follows the US currency, which in turn is falling throughout the market. Such a fundamental background allows testing the nearest resistance level of 0.7240 (the upper line of the Bollinger Bands indicator on the daily chart). If the greenback continues to lose its positions, then AUD/USD buyers can "swing" the next target in the form of a 0.7300 mark. In other words, longs remain a priority in the medium term - but only at the expense of the bad health of the US dollar.
