AUDUSD pair accepts an offer to renew intraday lows as the RBA remains silent for the second consecutive meeting.
The AUDUSD falls 40 pips following the Reserve Bank of Australia’s (RBA) decision not to raise interest rates. Extending early-day losses to roughly 0.6670 heading into Tuesday’s European session. However, further weakness in the Australian dollar remains elusive. As markets await the US ISM Manufacturing PMI for July and JOLTS Job Openings for June.
The RBA delays rate hikes, confounding estimates of a 0.25% increase, while maintaining benchmark rates at 4.1%.
The RBA defies market expectations by retaining the benchmark rate at 4.1% despite the two hawkish surprises in the previous monetary policy meeting in July. In doing so, the Australian central bank reiterates its dovish stance on the AUDUSD pair, hence justifying the previously reported disappointing Australian inflation figures.
Mixed China triggers, rising rates, and a cautious mindset ahead of second-tier US data all weigh on the Australian dollar.
Aside from the RBA’s stance, a stronger US Dollar Index, weaker China statistics, and mixed mood all weigh on the AUD/USD price. Nonetheless, despite mixed US activity statistics reported the day before, the US Dollar Index (DXY) maintains a three-week high as Treasury bond yields rebound. The recent rise in the DXY and yields could be attributed to President Austan Goolsbee of the Federal Reserve Bank of Chicago made hawkish remarks. Fears of future US-China squabbles could also be bolstering the US Dollar’s strength, as Beijing curbs drone shipments in retaliation to the US tech and trade war tactics, claiming “national security” measures.
Earlier in the day, China’s Caixin Manufacturing PMI for July fell short of the positive NBS counterpart, falling to 49.2 from 50.5 the previous month, vs 50.3 market predictions, marking the lowest level since January.
Against this environment, S&P500 Futures track Wall Street and post minor gains by press time, while US 10-year and two-year Treasury bond yields have recently risen.
Having seen the initial market, in response to the RBA’s measures, AUDUSD traders should keep an eye on risk catalysts for fresh impulse ahead of US activity and job data. If the early indicators for Friday’s US Nonfarm Payrolls (NFP) are positive, the Aussie pair sellers can maintain control. It’s worth noting, though, that the bears will need confirmation from the RBA’s Monetary Policy Statement (MPS) on Friday to maintain their lead.
Technical Outlook
AUDUSD recovery remains elusive unless it crosses a confluence of the prior support line from May 31 and the 200-DMA, which is expected to occur around 0.6730-35 by press time.
