The Reserve Bank of Australia (RBA) is set to announce the latest consignment of its interest rate decision as well as the accompanying rate statement. Analysts are expecting the RBA to maintain the 3-year static rate cycle it promised the markets a few months back, so there is not likely to be any change to the 0.25% benchmark. The RBA is also expected to continue providing the range of stimulus measures to enable the Australian economy to shake off the economic impact of the coronavirus pandemic. Some of these include:
a) Periodic liquidity boosts via open market operations.
b) Keeping the 3-year bond rate at 0.25%.
c) Maintaining a 3-year funding window for banks at 0.25%
d) Keeping at 10bps, the rates payable to the RBA as charges for balances on Exchange Settlement.
I expect the RBA to reiterate that these measures will continue for some time to come, without announcing any significant changes to these measures. The AUDUSD may not see much action from the RBA’s actions, but instead will be more sensitive to China data or the situation with the trade sanctions bill in the US which is waiting for US President Donald Trump’s assent. The local coronavirus situation in the US may also play a part in the USD’s price action.
We could be in for a relatively quiet session unless the RBA announces a major market surprise. I would expect the AUDUSD to show more reaction to next week’s budget release as well as the employment change data.
Technical Outlook for AUDUSD
Today’s strong stock market performance from China provided a boost to the AUDUSD, which is now bursting out of the symmetrical triangle on the daily chart. The immediate upside target is at 0.70034, with the high of 10 June 2020 at 0.70595 looking like another possible upside target if the advance continues. A measured move towards 0.72043 seems a little far-fetched at the moment, but not impossible.
On the flip side, a rejection at 0.70034 could lead to a pullback towards 0.69160, with further decline targeting 0.68615. A breakdown below this target opens up the pathway towards 0.67720, with 0.66742 well within limits as a future downside target if the commodity dollar flounders from a collapse in risky sentiment.
AUDUSD Daily Chart