The Australian dollar has again retreated from the 74th price level. The AUD/USD pair has been trading in the range of 0.7310-0.7390 for the second week, starting from the boundaries of this corridor. During the Asian session on Monday, buyers once again tried to approach the "ceiling" of the price range against the background of disappointing macroeconomic data from China. The same fundamental factor simultaneously strengthened the position of the US currency, which otherwise enjoys the status of a protective asset. As a result, the pair turned 180 degrees and headed to the lower border of the said price corridor.
Abstracting from intraday volatility, we can conclude that the pair is trading in a wide-range flat, not venturing into more large-scale "one-vector" movements. Upward impulses fade in the area of 0.7380-0.7390, and downward impulses at the base of the 73rd figure. In other words, we are talking about a 100-point flat range, which traders can leave only due to a strong information driver.
Such a driver may be the minutes of the August meeting of the Reserve Bank of Australia, which will be published on Tuesday - that is, tomorrow. It can be assumed that this document will put pressure on the Aussie, if during the meeting, the members of the Australian regulator voiced pessimistic scenarios for the development of events. After all, two weeks have passed de facto since the August meeting, and during these two weeks, the epidemiological situation in the country has only worsened. Therefore, if the RBA members discussed the option of suspending the curtailment of QE due to the deterioration of the epidemiological situation, the Aussie will significantly sink both in pairs with the US dollar and in cross pairs.
Analyzing the Australian news feeds, we can conclude that since the August meeting of the RBA, the epidemiological situation in the country has only worsened. Due to the increase in the incidence of diseases, millions of residents of the south-eastern regions of Australia live in isolation. In the largest metropolis of the country – Sydney - increased fines for non-compliance with the lockdown. Now, if any of the residents moves away more than 5 kilometers from their home, without a good reason, they will have to pay up to 5,000 Australian dollars. Compliance with quarantine rules is controlled not only by the police, but also by the military. In addition, the lockdown was extended for at least a week in the second largest city of the state – Melbourne, where more than 5 million people live.
But despite such strict and large-scale restrictive measures, the coronavirus does not retreat. In particular, last Friday, the state of New South Wales overcame another gloomy mark in the daily indicator of detected cases of coronavirus infection – 400 cases were recorded in the region in 24 hours. Even at the beginning of summer, isolated cases of infection were registered in the state (and in the whole country). But the "Indian" strain of Covid ("delta strain"), which is more contagious and dangerous, has made its sad adjustments – since mid-July, there has been a steady increase in the incidence. At the same time, only 25% of the country's residents are fully vaccinated. The pace of vaccination has accelerated, but compared to other developed countries, Australians are clearly lagging behind. For comparison, it can be noted that in Israel, about 70% of the country's residents have already been fully vaccinated against COVID-19, and among Israelis over 50 years old, the number of vaccinated has reached 90%. In the UK, about 70% of the adult population has also completed immunization. In the European Union, more than half of adults have already been fully vaccinated. Against this background, Australia looks like a clear outsider.
At the time of the RBA's August meeting, the situation with the coronavirus was already causing significant concern - both from Australian politicians and from members of the Australian regulator. Therefore, it can be assumed that this problem was discussed with a high degree of probability by the RBA members, both in the context of a possible slowdown in the pace of recovery of the national economy and in the context of a possible suspension of the curtailment of QE. Taking into account the fact that the situation has de facto worsened in 2 weeks after the meeting, such theses can put significant pressure on the AUD/USD pair.
The Chinese macroeconomic data did not please the traders either. China's economy continues to recover, but the pace of recovery has clearly slowed down - and this fact has a negative impact on the "well-being" of the Australian dollar. China remains Australia's largest trading partner, even amid the restrictions imposed by China and the tightening of tariff policy. July retail sales, industrial production, and investment in fixed assets were weaker than expected. Macroeconomic reports from China released today put background pressure on the Aussie.
Thus, for the AUD/USD pair, it is possible to continue to adhere to the sales strategy with an increase to the "ceiling" of the price range of 0.7310-0.7390. The Australian dollar is in a deliberately unfavorable position, especially when paired with the greenback, which is still "living with hawkish hopes".
