AUD/USD Pressured from Dovish RBA Commentary
AUD/USD - H1
The Aussie started off on a good footing, but dovish comments from the governor of the Reserve Bank of Australia (RBA) eventually push it into negative territory.
Mr Lowe pushed back against calls for rate hikes, reiterating his view that "the latest data and forecasts do not warrant an increase in the cash rate in 2022" [1]. This highlighted the unfavorable monetary polic divergence between the RBA and its US counterpart – the Fed. Sentiment also seemed to sour after initial positive reaction to the Xi-Biden virtual meeting, which is also detrimental for the pair.
After these developments, it erases earlier gains and breaks back below the EMA100, while the RSI moves below 50. This creates heightened risk for fresh weekly lows (0.7320), although those of the month (0.7275-64) will probably require a catalyst to be breached.
On the other hand, minutes from the last RBA policy decision that were released prior to the governor's speech had supported the pair, as officials acknowledged that "as the risks to the inflation forecast had shifted higher, it had become possible that an earlier increase in the cash rate would be appropriate". [2]
AUD/USD tries to defend 38.2% Fibonacci (0.7334) of its recent leg up, and as long as it succeeds, it has the ability to push beyond 0.7371, but the next major resistance (0.7432) is remote at this stage.
Investors will now look to US Retail Sales and Industrial Production for impetus.
Past Performance: Past Performance is not an indicator of future results.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 16 Nov 2021 https://www.rba.gov.au/speeches/2021/sp-gov-2021-11-16.html | |
| Retrieved 16 Nov 2021 https://www.rba.gov.au/monetary-policy/rba-board-minutes/2021/2021-11-02.html |
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