Australian Dollar Outlook Remains Bleak Following Release of RBA Minutes
Australian Dollar, AUD/USD, Reserve Bank of Australia, RBA Minutes – Talking Points
- Australian Dollar remains under pressure as Covid cases rise
- Reserve Bank of Australia highlights health concerns, uncertain outlook
- Weakening Chinese data continues to weigh on Aussie sentiment
The Reserve Bank of Australia (RBA) released the minutes from its most recent policy meeting, with market participants looking closely for any potential shifts in policy guidance tone. The minutes highlighted that the health crisis continues to play a large role in the implementation of accommodative policy, given that the near-term outlook remains highly uncertain. While financial conditions remain highly accommodative, the RBA indicated that it will continuously review the state of asset purchases. Of note, some members considered delaying the ongoing taper of asset purchases. Despite current struggles, the base case scenario for the RBA remains that growth will continue to rebound in 2022. Members have agreed that the central scenario for the economy is that conditions for raising rates will not be met before 2024.
The situation regarding Covid remains bleak in Australia, as Sydney reported its deadliest day of the entire pandemic on Monday. Major cities remain under lockdown, with armed forces on the streets limiting total traffic. Sydney is entering its 8th week of lockdown as the Delta variant wreaks havoc on the economy. Australia’s struggle against the Delta variant come as official numbers indicate just 26% of people above the age of 16 are fully vaccinated. Although major cities remain under strict lockdowns, case numbers continue to rise. The resurgence of a third wave of Covid highlights the potential for a double-dip recession in Australia, with the RBA highlighting that the near-term outlook has always been filled with uncertainty.
AUD/USD Daily Chart
Chart provided by TradingView
AUD/USD continues to trade sideways despite growing fears over the Delta Covid variant in Australia. Local lockdowns throughout the country, coupled with weakening economic data from China, may continue to weigh on the Aussie. Retail sales and industrial production data from China came in weaker than expected last week, piling on the back of a severe drop in US consumer sentiment. Economic data, along with “Fedspeak” regarding a possible taper outline in the fall may also keep AUD/USD suppressed at current levels. Currently, the pair continues to float above the support zone found between 0.7300 and 0.7320. Should this level prove to hold, a retest of the September 2020 swing high around 0.7414 may be on the cards.
AUD/USD 30 Minute Chart
Resources for Forex Traders
Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
--- Written by Brendan Fagan, Intern
To contact Brendan, use the comments section below or @BrendanFaganFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.