AUD Higher Following RBA Meeting

The Australian Dollar is seeing renewed demand over the European morning on Tuesday, following the June RBA meeting overnight. The RBA kept rates on hold, as expected and maintained a generally positive tone. The bank cited the current global recovery, noting a strong growth outlook for this year and next, saying that global trade is picking up firmly and commodity prices are rising well. However, the bank reiterated its view that the recovery remains uneven, with some countries still struggling to contain the virus.

Aussie Recovery Stronger Than Expected

On the domestic front, the RBA noted that the recovery has been stronger than it expected and looks likely to continue at such a pace. The bank is now forecasting GDP of 4.75% this year and 3.5% next year. The RBA noted that this outlook is supported by the government’s fiscal measures and generally supportive financial conditions. The RBA noted that employment conditions have been recovering at a faster pace than expected though vacancies remain high, with labour shortages in some areas of the economy. Looking ahead, the RBA forecasts unemployment to fall from the current 5.5% to around 5% by year end.

Uncertainty Remains

Despite the broadly positive tone to the statement, however, there were still some words of caution. The RBA cited the remaining uncertainty around the pandemic and the threat of further outbreaks of the virus which could derail the recovery. Furthermore, while the economic recovery continues, inflation and wage growth are forecast to remain subdued with the bank sticking to its view that rates look likely to remain on hold until 2024. The RBA also said that it will be carefully monitoring housing borrowing trends to ensure lending standards are maintained, given the environment of surging house prices and low rates.

Considerations on Watch in July

Finally, the RBA noted that at the next meeting (July), it will consider whether the current April 24th bond maturity will be maintained as the target bond for the 3-year maturity or whether it will move to the next maturity, the November 2024 bond The RBA said it will also consider whether to make further asset purchases once the second $100 billion of purchases is completed in September.

Technical Views

AUDUSD

AUDUSD continues to trade the range between the .7683 level and .7824 level. Following the recent break through the rising trend line from April lows, the pair found support into the .7683 level once again. With the MACD and RSI both roughly flat here, the market is struggling for conviction. To the topside, a break of .7824 should open the way for a move back up to the 80 level. To the downside, .7564 is the next support to note.

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