The Australian dollar was fluctuating in the range of 0.7320-0.7400 against the US currency, bouncing off the boundaries of this price channel. The Australian dollar follows the lead of the greenback as it still lacks any drivers for strengthening. After the last meeting of the Reserve Bank of Australia, the Aussie slightly gained ground. But then, macroeconomic events in the US such as Nonfarm payrolls, tougher rhetoric of the Fed's representatives, and relatively positive inflation data neutralized the success of the Australian currency. Buyers of AUD/USD failed to reach the 74th mark although in early August they made repeated attempts to gain a foothold in this price area. However, the assertiveness of the US currency outweighed all these attempts. Even though USD weakened after the inflation report was released, it still did not allow the bulls to push the pair above 0.7390.
All this suggests that traders are skeptical about the idea that the pair can demonstrate a large-scale corrective growth or reverse the trend. Therefore, any attempts of a correction, which are usually caused by the weakening of the US dollar, fade away almost immediately the same day. Market participants take profit as soon as the price starts approaching the 0.7400 resistance level. This is the upper line of the Bollinger Bands indicator which coincides with the Kijun-sen line on the daily chart. The US dollar bulls, in turn, are also quite reserved. Thus, the excitement around the greenback has significantly reduced amid first signs of a slowdown in the US inflation and worsening of the coronavirus situation in the country. Now everyone is waiting for the verdict of the "chief referee", that is, the head of the Federal Reserve, Jerome Powell. The economic symposium which takes place on August 28 will either provoke another dollar rally or cool the fervor of the dollar bulls.
Two weeks are left before the opening of the Jackson Hole Economic Symposium. Most likely, traders of the major dollar pairs will ignore many fundamental events and will focus on this major event of the month. Yet, volatility on the AUD/USD pair is likely to increase next week primarily due to the reaction of the Australian dollar. So, next Tuesday, the minutes of the last RBA meeting will be published, and on Thursday the release of the data on Australian labor market is expected. These releases can easily affect the trajectory of the AUD/USD pair even despite the cautious and phlegmatic state of the American currency.
For your reference, during its policy meeting in August, the Australian Central Bank decided to keep its key interest rate at a record low (0.1%) as well as the target yield on three-year bonds (0.1%). At the same time, the RBA' plans regarding the QE program and its curtailment stayed the same. Thus, the regulator confirmed the decision taken at the July meeting to reduce the volume of government bonds purchases from $5 million to $4 billion a week from this September. The last point was especially important. Thanks to the fact that the regulator decided to preserve its stimulus program, the Australian dollar stayed above the 72 mark and even grew slightly, having tested the boundaries of the 74th price level. This helped the Aussie hold the line and withstand the assertiveness of the US dollar bulls.
And yet, the minutes of this RBA meeting could put pressure on the Aussie. If the members of the Reserve Bank consider suspending the rollback of the QE program due to the worsening epidemiological situation, the Australian dollar will significantly depreciate both against the US dollar and its other counterparts. This is especially true for the pair with the New Zealand dollar amid RBNZ's hawkish intentions. The August meeting took place early last week, but since then the situation with the coronavirus has only worsened. For example, just yesterday, the Australian capital Canberra was closed for a 7-day lockdown which is likely to be extended for a longer period. Lockdown has been in place for 7 weeks in Sydney, Australia's largest city. Also last week, the authorities introduced a strict lockdown in the second largest city in the country, Melbourne, with a population of 5 million people. If the members of the regulator voice concern about the coronavirus pandemic, the Aussie will considerably weaken as the situation has deteriorated since August 3.
Australia's employment data for July will reflect the first consequences of the summer quarantine restrictions. According to preliminary forecasts, the unemployment rate in July will rise to 5.2% from 4.9% in June, while the rate of growth in the number of employed will go into negative territory. If the release comes in line with expectations, the Australian dollar will again face a sell-off wave.
Thus, in my opinion, the Australian dollar has lost this game which has not even started yet. Therefore, when the AUD/USD pair approaches the resistance level of 0.7400 (the upper line of the Bollinger Bands indicator, coinciding with the Kijun-sen line on D1), we can consider selling the pair from the first and the main target of 0.7310 (the lower line of the Bollinger Bands on the same time frame).
