The AUD/USD pair updated a 6-week price high during today's Asian session, reacting to the US dollar's general weakening and to the rhetoric of the published minutes of the last RBA meeting. Currently, the Australian dollar is testing the upper line of the BB indicator on the daily chart, which corresponds to the level of 0.7450. The pair was last seen at this level in early September, when it marked a local (two-month) high at 0.7479. After that, the price made a reversal and was within the downward trend throughout September.
At the moment, the Australian dollar is recovering its position largely thanks to the Reserve Bank of Australia, which did not dramatize the situation in the labor market. RBA members were "understanding" about the failed releases, which were due to a prolonged and strict lockdown in the largest metropolitan areas of the country. The restrained position of the Central Bank amid the weakening of quarantine restrictions allowed AUD/USD buyers to reach new peaks that have been unattainable over the past months.
It should also be noted that today's growth of the pair is also due to the general weakening of the US dollar. The RBA minutes played an important, but only a secondary role. The US dollar index declined to three-week lows during the Asian session on Tuesday, following the quotes of the oil market. The cost of a barrel of Brent crude oil fell to $ 83 in a few hours, despite the fact that oil traders were testing the $ 86 mark yesterday. It seems that this recession provoked a sell-off of the US currency, since there are no other visible (and most importantly, significant) reasons for the downfall of the US dollar. In my opinion, this decline is emotional, and therefore, temporary. It is also worth noting that the yield of treasuries (in particular, 10-year securities) is kept at a high level. In particular, the yield of 10-year government bonds, although it has retreated from its maximum (1.625%), is still at a multi-month peak (1.584%). In addition, dollar bulls still have very powerful trump cards in the form of rising US inflation and the Fed's "hawkish" intentions (the minutes of the September Fed meeting only confirmed these intentions). Therefore, the current downturn is somewhat anomalous in nature, and it should be treated accordingly.
Now, let's return to the Australian dollar. For several months, the specified currency moved exclusively in the wake of the US currency. The next wave of the coronavirus crisis "disarmed" the Australian dollar, which was under pressure from many fundamental factors. The strict quarantine, which lasted for several months, affected key macroeconomic indicators, initially in the labor market. The growth rate of the number of employed over the past two months (August, September) was in the negative area. The share of the economically active population also decreased. The Australian Nonfarm data did not allow buyers of AUD/USD to play their game – any upward correction was due to the US dollar's temporary weakening,
But after the outcome of the last RBA meeting, the AUD received "tacit support": the regulator did not revise its plans to curtail the stimulus program. The Central Bank said it would buy government securities at a rate of $4 billion per week until mid-February next year. This circumstance inspired AUD/USD buyers, as rumors were circulating before the October meeting that the next round of QE cuts would be postponed again – this time to March-April.
Today's publication of minutes indicates that according to the Reserve Bank's baseline scenario, the country's economy will return to the path of growth in the fourth quarter of this year, as quarantine restrictions ease. The Central Bank plans to return to the pre-crisis level in the second half of next year. A similar position was previously expressed by the head of the Australian regulator, Philip Lowe: he believes that the slowdown in economic growth in Australia will be temporary – "as the number of vaccinations continues to increase and restrictions are lifted, key economic indicators will recover."
In view of such rhetoric, yesterday's news from the "covid front" strengthened the Australian dollar's position. It became known that the strict lockdown regime will be canceled next week in the second-most populous city in Australia – Melbourne. It's no joke that in a five-million megalopolis, quarantine lasted more than 260 days. The main reason for the cancellation of strict lockdown is the activation of vaccination against coronavirus in Victoria. 70% of the population over the age of 16 has already been fully vaccinated in the region. And in the largest city of the Green Continent, namely Sydney, quarantine was noted since yesterday. In this state, the level of immunization with a double dose of the vaccine has reached 80%.
All this suggests that the AUD/USD pair retains the potential for its further growth, especially against the background of a temporary weakening of the USD. At the moment, the Australian dollar is testing the upper line of the Bollinger Bands indicator on the daily chart (0.7450). Given the strength of the upward momentum, it can be assumed that buyers will break through this resistance level and head to the next price barrier, which is located at 0.7500 (the Kijun-sen line on the weekly chart).