AUD/USD UP As Sentiment Improves, RBA Holds Steady

  • AUDUSD
    (${instrument.percentChange}%)

RBA Decision

The Reserve Bank of Australia maintained interest rates unchanged at 0.1% as expected earlier today [1], having concluded its asset purchase program last month. The bank is on the dovish side compared to its major counterparts and especially neighboring RBNZ, which delivered its third straight rate hike, during the previous week.

Overall, there were no surprises, since the RBA reiterated its patience and that it will not increase the cash rate until actual inflation is sustainably within the 2%-3% target range.

Governor Lowe said that the economy remains resilient and spending is picking, following the Omicron setback, while this is evident in the labour market as well. Australia had quite strict lockdown, but it reopened its international border to all vaccinated tourists on February 21.

The statement mentioned that the war in Ukraine is a major new source of uncertainty for the global economy and a cause of further increases in the prices of many commodities.

Ukraine News

The war in Ukraine has now entered its sixth day and Western countries have imposed increasingly tougher sanctions against Russia, after initial tranche of largely underwhelming measures. These include cutting important Russian banks form the international SWIFT payment system and sanctions against the country's central bank.

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They have not so far put a ban on Russian oil and gas, apart from Canada. Prime Minister Trudeau announced his intention "to ban all imports of Russian crude oil", although the move is mostly symbolic, since based on the PM's own comments "Canada has barely imported any Russian oil and gas in recent years".[3]

Yesterday's peace talks between the Russian and the Ukrainian delegations, offered some optimism, but have not resulted in any major breakthrough.

AUD/USD

Despite risk aversion waves due to Russia's invasion in Ukraine, we have also seen risk-on mood prevailing, as market digest the related news and volatility has been high recently. Risk sensitive Aussie has concluded a profitable month against the greenback, having entered its fifth straight positive week.

Today, sentiment is upbeat and the pair is on the offensive, trying to take 0.7300-15 out, which include the 200Days EMA and January's 2022 highs. Successful effort will allow it to look towards and beyond 0.7369.

On the other hand, the Relative Strength Index heads towards overbought territory and the situation in Ukraine remains precarious, both factors that can limit the upward aspirations and create selling pressure. As such, a retreat back below mid-0.7200s could be in play, but the 0.7200-0.7180 area offers significant protection, as it concentrates the daily Ichoimoku Cloud and the EMA200. Closes below this level will shift near-term bias to the downside.

From the economic calendar, we expect Australia's Q4 GDP overnight and Mr Powell's two-day Congress testimony (Wednesday and Thursday).

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 01 Mar 2022 https://www.rba.gov.au/media-releases/2022/mr-22-05.html

3

Retrieved 27 Jun 2022 https://twitter.com/JustinTrudeau/status/1498425069000867847

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