The AUD/USD will be the currency in view as the Reserve Bank of Australia (RBA) presents its rate decision and statement. Rates are expected to remain unchanged, with the emphasis being laid on whether the accompanying statement will present a hawkish tilt by the RBA or not.
Most banks sampled favour a dovish tilt, as the RBA worries about the slow pace of wage growth and excess capacity in the labour market. These two factors could subdue inflationary pressures in the medium-term, which gives the RBA no impetus to consider early tapering or rate increases. Furthermore, the recent lockdowns resulting from a renewed COVID-19 wave in some parts of the country and worsening relations with China are considered headwinds for the Australian economy, which are grounds for the RBA to maintain the loose monetary policy.
Technical Levels to Watch
The 2-day rise following the mixed NFP, which undermined the US Dollar, will be put to the test by the RBA decision. A hawkish statement allows the pair to add to these gains, targeting 0.75630. However, the additional recovery of the pair relies on the price breaking above the 0.76185 resistance (25 June high), which also takes out the 0.75859 resistance barrier. This scenario also opens the pathway for bulls to aim for 0.76555 and possibly 0.7700.
On the other hand, a dovish tilt puts pressure on the 0.75141 support, with additional downside targets coming up at 0.74640 and 0.7400 if the decline is extensive.