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US Dollar Ranging Amid Narrative Vacuum, AUD/USD Reacts to RBA

US Dollar Ranging Amid Narrative Vacuum, AUD/USD Reacts to RBA

Justin McQueen, Strategist

US Dollar Analysis & News

  • Range Trading for FX Markets Amid Narrative Vacuum
  • RBA Holds Now, Will Ease Later
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Range Trading for FX Markets Amid Narrative Vacuum

Amid the current narrative vacuum, FX markets are struggling for direction with major pairs trading in relatively tight ranges. The US Dollar remains subdued following yesterday’s rising optimism that a new stimulus package may be on the way, particularly after Senate Majority Leader McConnell signalled that a deal may be inching closer. Optimism over a fresh fiscal impulse had been highlighted in the sizeable bear steepening of the treasury curve, which saw the 2s10s rise above 60bps for the first time since August. In turn, investor attention will likely be placed on the outcome of today’s talks between US House Speaker Pelosi and Treasury Secretary Mnuchin. However, as it stands, my expectation is that a stimulus package will not be agreed prior to the election. On the technical front, upside has been capped at 93.54 with support residing at 93.25.

US Dollar Price Chart: Hourly Time Frame

US Dollar Ranging Amid Narrative Vacuum, AUD/USD Reacts to RBA

RBA Holds Now, Will Ease Later

Overnight, as had widely been touted, the RBA refrained from policy action with the cash rate target and 3yr yield target at 0.25%. The RBA did however, note that the board will continue to mull how further monetary stimulus can support jobs and thus laying the groundwork for a policy move in November. As such, while the Aussie saw a brief spike above 0.72 amid an unwind of easing calls for this meeting, RBA is still likely to ease policy in the near-term, thus the slight jump in AUD had been short-lived. Looking ahead, the Aussie will likely take its cue from the broader risk environment. Topside resistance at 0.7200-10 has held for now, a break puts 0.7240-50 in focus, while support sits at 0.7120-30.

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