TALKING POINTS: AUD/USD, RBA, GOVERNOR LOWE, GDP, TRADE WARS:
- Australian Dollar rose after the RBA maintained 1.50% OCR, noted eventual pickup in CPI
- AUD/USD continues to be bearish, but downside momentum may be slowing
- RBA Governor Lowe’s Speech, 2Q GDP, and US-China tariffs in the spotlight next
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The Australian Dollar spiked against its US counterpart after the Reserve Bank of Australia maintained its overnight cash rate at the record low of 1.50% at its September meeting. The monetary policy authority stated that low rates continue to support the Australian economy, adding that its unchanged policy is consistent with meeting the 2% inflation target and ensuring sustainable economic growth. The RBA also added that there is likely to be gradual progress in jobless rate and CPI figures, and that it sees inflation in 2019 and 2020 to be higher than currently.
AUD/USD Chart (5-minute)
Chart prepared in TradingView
Despite the uptick in AUD prices, follow-through is likely to amount to mainly trimming earlier losses sustained against the US Dollar earlier in Tuesday’s trading session. The Aussie Dollar has suffered against the greenback for the majority of this year, as the pair has been engaged in a downtrend channel beginning in February 2018, possibly breaking December/May 2016 lows of 0.7160 or even testing below the 0.70 figure. Slowing economic activity and political uncertainty due to a shakeup in Prime Ministers have led the Australian Dollar to sink as of late. However, positive RSI divergence suggests that downwards momentum is ebbing, potentially leading prices for the risk-on unit to either rally or consolidate. Investors should look for a break below December 2016 lows for confirmation before making next moves.
AUD/USD Chart (Daily)
Chart prepared in TradingView
Looking ahead, the Australian Dollar may continue to pare earlier losses following forward guidance from RBA Governor Lowe’s speech later today. The currency also faces the release of second quarter year-over-year growth statistics, which are expected to decrease to 2.8% from the prior 3.1%. Furthermore, July’s trade balance figures and local housing data are to be released later this week.Finally, risk trends continue to play a large role for the pro-risk Aussie Dollar, which will be closely eyeing the implementation of $200B of US tariffs on Chinese imports set to be in effect on September 5th. As for American economic data, August’s change in non-farm payrolls and unemployment rate may cause some volatility for the currency pair as well.
AUD/USD Trading Resources
- Join a free Q&A webinar and have your trading questions answered
- Just getting started? See our beginners’ guide for FX traders
- Having trouble with your strategy? Here’s the #1 mistake that traders make
- See how the Australian Dollar is viewed by the trading community at the DailyFX Sentiment Page
--- Written by Megha Torpunuri, DailyFX Research Team