The RBA's final meeting for this year was held today and it turned out to be a passing one. As expected, the members of the regulator did not change the criterion of monetary policy and did not announce any steps in this direction. Therefore, Central Bank's accompanying statement about its readiness to expand QE if necessary, can be disregarded, since it does not indicate the specific intentions of the RBA to exercise this leverage in the near future. Over the past year, this phrase has become a kind of "attribute" of the final statement.
Overall, nothing concrete was expected from the December meeting. The previous releases and comments of the RBA members indicated that the regulator would take a wait-and-see attitude. Therefore, traders of AUD/USD primarily focused their attention on the tone of the Central Bank members' rhetoric. The current fundamental background allowed us to assess the situation in different ways, focusing on certain factors – negative or positive.
Looking ahead, we can say that the Reserve Bank positively assessed the latest trends in the country's economy. It should be recalled that with the actual growth of the unemployment rate, the growth rate of the number of employed (which is a more operative indicator) suddenly soared. The number of employees increased by almost 130 thousand, although it was forecasted to decline by 30 thousand. At the same time, the full-time employment factor showed positive dynamics, which almost match with the part-time employment.
The Reserve Bank of Australia appreciated such a significant breakthrough, which was recorded during the period of quarantine restrictions in the Victoria state. At the moment, quarantine has been almost lifted both in this state and in the country as a whole. The daily COVID-19 cases fluctuates in the range of 5-12 people (per 25 million population), so the authorities both from the local and national level have gradually loosen those restrictions that were still in effect at early November.
At the same time, RBA members noted that the latest macroeconomic releases have generally turned out to be better than forecasts. In their opinion, the restoration process will remain unstable and still depend on the support of the authorities. The Central Bank assured the markets that it will maintain the current rate level for at least three years. Nevertheless, they expressed their readiness again to take new measures if necessary; in particular, the issue of the volume of the bond purchase program remains open for revision. In addition, the Central Bank noted that the focus is on the labor market. Australian regulators are still worried about high unemployment, despite optimism in the latest release.
Thus, the Reserve Bank of Australia did not push the AUD below, allowing it to focus on the behavior of the US currency. Maintaining the status quo, they voiced optimistic-neutral rhetoric, which clearly supported the Australian currency.
Statistics from China also provided indirect support to the AUD today: the PMI index for the manufacturing sector from Markit entered the "green zone" (54.9 points), after updating this year's high. The official data (PMI index for the manufacturing sector) was published yesterday, which also turned out to be better than the forecast values. The indicator updated its multi-month high and was at around 52.1, which was the best result since March this year. The index of activity in the non-manufacturing sector has completely updated its annual high, reaching 56.4. In other words, Chinese economy continues to recover, which can lead to a positive effect on the current state of the Australian dollar. Despite the ongoing political conflict between Canberra and Beijing due to the restrictions and the tightening of the tariff policy, China still remains the largest trading partner of Australia.
The formed fundamental background allowed the AUD/USD buyers to stay within the level of 0.73, which opens the way to the limits of the 0.74 price level in the medium term. Yesterday's correctional growth of the US dollar was primarily due to the massive profit-taking on the last day of the month. In addition, Mr. Biden formally appointed former Fed Chairman Janet Yellen as the US Treasury Secretary yesterday. It is well known to traders and currency strategists, so the market received it with optimism. Some analysts believe that she will lobby for the adoption of a large-scale package of additional assistance to the US economy.
However, the USD is weakening again today. Market optimism about Ms. Yellen quickly disappeared, since the Democrats need to pass the Senate, where the Republicans are the majority. It can be recalled that the majority of senators do not support the idea of large-scale incentives, so this remains unsolved. In addition, the dollar is still under pressure from other fundamental factors (COVID-19 in the US, general risk appetite, decline in anti-risk sentiment, weak dynamics of key macro indicators, etc.). As a result, the dollar index declined again during the Asian session, returning to the 91st figure.
Given all of the above, we can assume that long positions are still in priority for the AUD/USD pair. This is also indicated by the technical outlook. The price on the daily chart is located between the middle and upper lines of the Bollinger Bands indicator, as well as above all the lines of the Ichimoku indicator (including the Kumo cloud). The first upside target is the level of 0.7400 – upper line of the Bollinger Bands indicator.
