The Australian dollar received support from the Reserve Bank today, which summed up the results of its regular meeting during the Asian session on Tuesday. Although it is not quite correct to talk about "support" in this case: the Australian regulator just did not implement the most pessimistic scenarios that were discussed by experts on the eve of the meeting. A kind of tension spring unclenched, pushing the pair to the upper limit of the 0.7300-0.7400 range, within which the Australian dollar is trading for the third week in a row.
However, in the area of the resistance level of 0.7400, the northern impulse began to fade, even despite the rather weak positions of the US currency. The US dollar index fell to the base of the 92nd figure and drifted, reflecting the phlegmatic mood of dollar bulls. But the buyers of AUD/USD did not become the beneficiaries of the current situation: neither the weakening of the US dollar nor the wait-and-see attitude of the RBA contributed to the breakthrough growth of AUD/USD. By and large, the pair remained in the same positions as before the RBA meeting. The Australian regulator allowed the pair's bulls to approach the upper limit of the price tier, but did not become a catalyst for further growth. Therefore, we can assume with a high degree of probability that the Australian dollar will continue to follow the US dollar in the medium term: the Australian currency has not had its own arguments for a large-scale strengthening.
But let's return to the results of the RBA's August meeting. Following the results of today's meeting, the Central Bank kept the key interest rate at a record low (0.10%), as well as the target level of yield on three-year bonds by 0.10%. At the same time, the Central Bank demonstrated the previous attitude towards the QE program and its curtailment. Thus, the regulator confirmed the decision taken at the July meeting to reduce the volume of purchases of government bonds to $4 billion a week from September from the current five billion. The last point, perhaps, is of a key nature – it is thanks to the preservation of the previous position on the part of the RBA regarding the stimulus program that the Australian dollar did not fall into the area of the 72nd figure. But on the contrary, it grew a little, testing the boundaries of the 74th price level.
On the eve of today's meeting, many experts admitted the option of softening the rhetoric of the RBA representatives, against the background of another coronavirus crisis that has engulfed Australia. It should be recalled that the authorities of the largest Australian states have "quarantined" half of the country's population, responding to the deterioration of the epidemiological situation. The most severe quarantine restrictions have been introduced in the states of Victoria, New South Wales and South Australia. The authorities of the largest city in Australia, Sydney, even tightened the lockdown conditions last weekend – since July 29, the strict quarantine regime, which has been lasting for five weeks in a row, prescribes citizens not to leave their homes for more than 10 kilometers and go outside "only in case of urgent need".
The Reserve Bank of Australia did not ignore the current situation, but also did not make hasty conclusions. The regulator noted that the recent outbreak of coronavirus interrupted the recovery of the national economy, so the volume of GDP is likely to decline in the third quarter. At the same time, the members of the Central Bank stressed that "previous experience suggests that when this outbreak is localized, the economy will recover quickly."
Such unexpected optimism from the RBA surprised the markets. Representatives of the regulator also noted the success of the Australian economy, in the context of the latest key releases. For example, Australian inflation shows a fairly "sporty" growth rate. The overall consumer price index in the second quarter increased by 0.8% (in quarterly terms), while experts expected to see this indicator slightly lower, at around 0.5%. In annual terms, a jump in growth was recorded: after rising to 1.1% in the first quarter, the CPI jumped to 3.8% in the second quarter, updating a long-term record. The same dynamics was demonstrated by core inflation – all components came out at the level of forecasts, demonstrating the strongest growth. The labor market is also an "ally" of the Australian dollar. The June unemployment rate came out at low values (4.9%), and the overall indicator of the growth in the number of employed consistently comes out in the "green zone" for several months in a row. Moreover, the structure of the latest release suggests that the increase in the number of employees was due only to full-time hiring.
Thus, the Reserve Bank of Australia did not sink the Australian currency today, but at the same time provided very modest support. Buyers of AUD/USD could not impulsively overcome the resistance level of 0.7400 (the middle line of the Bollinger Bands indicator on the D1 timeframe). If, according to the results of today, traders do not gain a foothold within the 74th figure, we can consider short positions with the first target of 0.7350 (the Tenkan-sen line on D1) and the main target of 0.7300 (the lower line of the Bollinger Bands on the same timeframe).
