The traders of the AUD/USD pair ignored the results of the RBA's April meeting, which were announced during the Asian session on Tuesday. The regulator did not provide any significant reason for volatility. The Central Bank left all the parameters of monetary policy unchanged and the main context of its accompanying statement have already been said earlier. Therefore, we can say that the meeting of the Reserve Bank of Australia is just passing, with useless results for both the buyers and sellers of the AUD/USD pair.
The Australian dollar slightly rose to the middle of the 0.76 mark during the past day, after testing the upper border of the range of 0.7540-0.7650, wherein the pair has been trading for almost two weeks. The pair's growth was due solely to the weakening of the US currency amid the statements by some senators regarding the prospects for the adoption of Joe Biden's massive $ 2 trillion economic plan. In other words, the US dollar set the mood of yesterday's trading, despite the empty economic calendar due to Easter Monday. Moreover, it seems that the AUD/USD pair will also follow the US dollar index in the medium term, which will respond to the twists and turns associated with the adoption of a resonant bill. In addition, the market failed to actually make use of the strong Nonfarm published last Friday, since it was Good Friday at the end of the week and Easter Monday was celebrated on Monday. Therefore, the traders actually ignored that US labor market data, although it deserves appropriate attention.
Now, let's start with the results of the RBA's April meeting. As mentioned above, the Australian Central Bank just actually reiterated what has been said last March on its accompanying statement. The text of the statement was balanced, so it did not make any impression on either the AUD/USD bears or bulls. On the one hand, the regulator acknowledged that the country's economy is recovering more actively than previously expected, while noting the positive dynamics in the labor market. However, this is the only positive thing, since all other remarks are either negative or cautious.
RBA stated that the recovery process remains uneven, while uncertainty about the forecasts remains, including in the labor market. At the same time, the members of the Central Bank reminded us that at the end of March, the government's JobKeeper subsidy program, which was used by about a million Australians, was already done. Against this background, Australia's unemployment rate may increase again. In addition, the RBA members also pointed out the slow growth of inflation indicators. They believe that price and wage pressures will remain weak for several years. So, they concluded that the inflation and employment targets will be reached no earlier than 2024. One should not count on the tightening of monetary policy conditions for the next three years. Moreover, the Central Bank has warned that it is ready for additional purchases of bonds, if necessary. However, the Reserve Bank already voiced these dovish rhetoric earlier, so the Australian dollar actually ignored the April meeting of the RBA members.
Considering this fact, we can assume that the Australian currency will follow its US counterpart in the near future. It should be noted that the US dollar came under pressure yesterday after the announcement of the Democratic Senator Joe Manchin. The politician said that he and several of his party members in the Upper House of Congress may not support the infrastructure development plan, which is estimated at $ 2 trillion and 600 billion. The problem lies in the tax reform, which is going in conjunction with the new economic plan.
In order to finance a large-scale project, the White House proposes to increase the corporate tax rate to 28%. It is necessary to recall that unlike the House of Representatives, the Democrats in the Senate do not have "spare" votes – with the Republicans, they have a 50/50 ratio, together with the decisive vote of Vice President Harris. If at least one Democratic senator opposes, the bill will not gain the force of law. In fact, one of the senators had to be literally persuaded for almost 11 hours when the previous aid package was adopted. He voted "yes" in the end, and the $ 1.9 trillion law was signed by the US President. However, several Democratic senators have now opposed Biden's new initiative, while Republicans clearly do not support the idea of raising taxes.
To simply put it, Biden's team will now face difficult negotiations with representatives of the Democratic Party in the Senate. However, these negotiations are fundamentally different from the negotiations of last year, when the 1.9-trillion bill could not be negotiated by Republicans and Democrats. In this case, the fate of the infrastructure project depends on the results of the "internal party showdowns". According to some experts interviewed by Bloomberg, the bill will certainly still be approved. For example, the White House can reduce the tax burden (in particular, the corporate tax can be increased to 24-25%, and not to 28%). Any prerequisites for a compromise on this issue will provide significant support to the US dollar.
Technically, the US dollar is currently under temporary background pressure. In the case of the AUD/USD pair, the short-term weakness can be used to open short positions at a better price. Considering RBA's position, the Australian dollar in the medium term will not be able to oppose the US dollar, so the downward trend remains. Here, AUD/USD sellers need to break through the level of 0.7600 (Tenkan-sen line on the daily chart). In this case, the Ichimoku indicator will form a bearish signal "Parade of Lines", which will open the direction towards the main support level of 0.7520 (lower Bollinger Bands line on the same time frame).
