The RBA is under the spotlight, and markets are anticipating a less hawkish decision.
The AUD/USD currency pair is about to make a big decline to retest 0.7500.
The Australian dollar is firmer than it was a week ago, with bulls in control and risk appetite boosted by the “Goldilocks” interpretation of last week’s US Nonfarm Payrolls.
Despite the good headline number, the dollar has not moved higher, despite the fact that 850,000 jobs were added last month, significantly exceeding expectations and following a rise of 583,000 in May.
The unemployment rate increased to 5.9% from 5.8% in May, while the highly monitored average hourly wages, a barometer of wage inflation, increased by 0.3 percent just last month, providing the impetus for a weaker US dollar.
The devil is in the details, as markets have traded profitably as investors believe the Fed will not modify its policies any time soon.
The Federal Open Market Committee meetings on July 27-28 and September 21-22, as well as the Jackson Hole Symposium on August 26-28, will be on the minds of investors.
Low volatility could return to forex for a little longer between now and then, as we approach the summer lull.
The question is whether the greenback will be able to maintain its upward trend.
The Federal Reserve will likely keep US money market rates tilted towards a rate hike in 2022, which should be favorable to lower yielders at the very least.
The Reserve Bank of Australia’s meeting on Tuesday will be watched closely to see if it follows other central banks in signaling a rate hike in 2022.
If markets are compelled to re-price some of their hawkish forecasts, the AUD may be put under pressure.
A retreat could be in order from a 4-hour perspective, with a target of 0.75 in a 38.2 percent Fibonacci retracement./n
