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Australian Dollar Talking Points: RBA, Philip Lowe, China Trade, RBNZ

  • Australian Dollar edged cautiously higher on Philip Lowe speech and Chinese trade
  • Ahead, a relatively dovish RBNZ monetary policy announcement could boost Aussie
  • AUD/USD remains in consolidation after recent push higher, eyeing February line

Join a free Trading Q&A webinar and have your questions answered about the Australian Dollar and comments from RBA Governor Philip Lowe!

The Australian Dollar edged cautiously higher as RBA’s Governor Philip Lowespoke. Just yesterday, the central bank left its benchmark lending rate unchanged at 1.50% as expected which marked the 2-year anniversary if its last adjustment. There, the Reserve Bank of Australiadowngraded near-term inflation expectations while simultaneously upgrading more outward looking estimates.

Mr. Lowe noted that we should expect inflation to rise and be close to 2.5% by 2020. He also reiterated that the next rate move would be up if the outlook ‘stays favorable’. But before RBA hawks could get excited, Lowe added that he still sees no strong case for a near-term monetary policy adjustment. With that in mind, rate hike bets seemed unaltered as Australian front-end government bond yields remained unchanged.

Even so, the Australian Dollar may have benefited from Chinese trade balance statistics which were released at the time of Lowe’s speech. In Dollar terms, net exports clocked in at $28.05b in July versus $38.92b expected. Meanwhile, imports rose 27.3% y/y versus 16.5% anticipated. Exports climbed 12.2% versus 10.0% seen. Keep in mind that this was the first month in which the US imposed tariffs on China imports.

BACKGROUND: A Brief History of Trade Wars, 1900-Present

The surge in imports could have positive knock-on effects for Australia’s economy given that China is their largest trading partner. Even so, the RBA remains patient before adjusting rates. Ahead, the Australian Dollar could benefit from Wednesday’s RBNZ monetary policy announcement. There, a relatively dovish central bank could hurt the New Zealand Dollar and boost AUD given that the latter is a substitute for it from a yield perspective.

AUD/USD reaction to RBA Philip Lowe speech and China trade data

Released our 3Q forecasts for the US Dollar and equities in the DailyFX Trading Guides page

AUD/USD Technical Analysis

Looking at the bigger picture, the Australian Dollar remains in consolidation mode against its US counterpart and it has been since mid-June. There was a push above near-term descending resistance, but AUD/USD’s range between 0.7481 and 0.7315 is still in play.

Continuation of its push higher will eventually reach a descending trend line from February. Pushing above that will expose the 23.6% Fibonacci extension at 0.7506. On the other hand, near-term support is a range between 0.7330 (May 2017 low) and 0.7315 (50% midpoint of the extension). Under that lies 0.7229.

AUD/USD Daily Chart

AUD/USD Trading Resources:

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter