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Less-Dovish RBA Minutes to Fuel AUDUSD Rate Rebound

Less-Dovish RBA Minutes to Fuel AUDUSD Rate Rebound

2019-09-16 04:00:00
David Song, Strategist
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Australian Dollar Talking Points

AUDUSD holds a narrow range ahead of the Reserve Bank of Australia (RBA) Minutes, but more of the same from Governor Philip Lowe & Co. may fuel the recent rebound in the exchange rate as the central bank appears to be in no rush to implement lower interest rates.

Less-Dovish RBA Minutes to Fuel AUDUSD Rate Rebound

AUDUSD has cleared the August-high (0.6868) after failing to test the yearly-low (0.6677), and the monthly opening range keeps the topside targets on the radar as the exchange rate appears to be unfazed by lackluster data prints coming out of China, Australia’s largest trading partner.

At the same time, recent remarks from the RBA suggests the central bank will stick to the sidelines for the foreseeable future as Governor Lowe encourages the Australian government to provide fiscal support, with the central bank head noting that “infrastructure investment is actually the best housing policy” during an interview with The Age Newspaper.

Image of DailyFX economic calendar

In turn, the RBA Minutes may largely highlight a wait-and-see approach for monetary policy as “recent labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment,” and the central bank may keep the official cash rate (OCR) on hold at the next meeting on October 1 as fresh updates to Australia’s employment report is anticipated to show the economy adding 15.0K jobs in August.

With that said, AUDUSD may stage a larger rebound over the coming days, and current market conditions may keep the exchange rate afloat as the US and China offer “gestures of good will before Vice Premier Liu He heads to the states in October.

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AUD/USD Rate Daily Chart

Image of audusd daily chart

Source: Trading View

  • Keep in mind, the AUDUSD rebound following the currency market flash-crash has been capped by the 200-Day SMA (0.7021), with the exchange rate marking another failed attempt to break/close above the moving average in July.
  • With that said, the broader outlook for AUDUSD remains tilted to the downsideas both price and the Relative Strength Index (RSI) continue to track the bearish formations from late last year.
  • However, AUDUSD has cleared the August-high (0.6868) after failing to test the yearly-low (0.6677), with the monthly opening range keeping the topside targets on the radar.
  • The break/close above the Fibonacci overlap around 0.6850 (78.6% expansion) to 0.6880 (23.6% retracement) brings the 0.6910 (38.2% expansion) region on the radar, with the next area of interest coming in around 0.6950 (61.8% expansion) to 0.6970 (23.6% expansion).

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--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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