As the RBA maintains its monetary policy, the AUD/USD oscillates near intraday/weekly highs, implying that QE will be extended.
DXY prints three-day downtrend despite Treasury yiled comeback.
Covid’s problems persist, and Epsilon adds to the virus-driven pessimism.
Lowe, the RBA’s chief economist, must defend the bulls’ recent gains.
Despite falling from the recent high of 0.7560, up 0.46 percent intraday, in early Tuesday, the AUD/USD pays little attention to widely expected RBA inaction. As a result, the Aussie pair benefits from broader US dollar weakening.
The Reserve Bank of Australia (RBA) shattered hopes that the Australian central bank would tease out monetary policy consolidation at its July meeting. The RBA, on the other hand, kept the benchmark interest rate at 0.10 percent and the three-year bond yield target unchanged. The central bank also hinted at new bond-buying intentions.
In July, the RBA held rates constant at 0.10 percent and announced plans for a third round of quantitative easing.
The RBA’s newest decision is influenced by Australia’s coronavirus (COVID-19) conditions, as the country grapples with a covid variant outbreak. According to ABC News, while the number of new cases has decreased to 29 from 44 so far in July 2006, the situation in Sydney, Queensland, and New South Wales remains dire.
The latest addition to the virus worries is Epsilon, a vaccine-resistant strain that might represent a serious threat if it spreads quicker outside of California.
In other news, following Friday’s mixed employment data, which included an increase in headline Nonfarm Payrolls (NFP) but a stronger Unemployment Rate, market sentiment remains divided regarding the Fed’s future moves. As a result, today’s US ISM Services PMI for June, which is predicted to be 63.5 vs 64.0 before, will be heavily scrutinized for an inflation component ahead of the FOMC minutes, which are expected to reaffirm the Fed officials’ divide and reawaken the US dollar bulls.
On a short-term perspective, AUD/USD traders are more interested in RBA Governor Lowe’s comments to learn more about the reasons behind the recent changes. Should the central banker seem pessimistic, the price may fall, but the US data will be crucial after that.
Check out the ISM Services PMI Preview: Why may the inflation component be the catalyst for a dollar rally?
The AUD/USD buyers are hoping to reclaim control after a solid break of the monthly resistance line, which is now support. The biggest stumbling block is the 200-DMA near 0.7575./n
