• The Reserve Bank of Australia is expected to maintain the monetary policy on hold.
  • The latest coronavirus developments hint at a dovish shift from policymakers.
  • AUD/USD is bearish and could fall to fresh 2021 lows with the RBA’s announcement.  

The Reserve Bank of Australia will announce its monetary policy decision on Tuesday, August 3. The central bank is expected to maintain the cash rate steady at 0.1% and the three-year target of 0.1% on government bonds. In its previous meeting, the RBA decided to reduce the pace of bond purchases starting September from A$ 5 billion per week to A$ 4 billion. Given the latest developments, market participants are expecting the RBA to revert such a decision.

Australia is battling against the pandemic. The country has extended its current local lockdowns, which started in June. That makes almost three months of reduced economic activity, and macroeconomic figures are reflecting so. At this point, speculative interest has pushed back a possible rate hike to early 2023.

Inflation and employment

One thing may require particular attention: inflation was much higher than anticipated, as the annual inflation rate jumped to 3.8% in the second quarter of the year, from 1.1% for the twelve months to March. Governor Philip Lowe & Co will likely attribute it to temporary factors.

The other main point is employment. The unemployment rate contracted to 4.9% in June, which somehow suggest that the country is getting closer to full employment. However, policymakers are focused on wages, which ticked higher in the first half of the year, but remain subdued. The annual growth rate is 1.5%. The RBA has noted that a rate hike will depend on the unemployment rate falling sufficiently to start pushing up wages.

AUD/USD possible scenarios

Overall, market players are anticipating a dovish stance that should put the AUD under selling pressure. The AUD/USD pair is depressed, trading below the 0.7400 level. In July, the pair set a yearly low at 0.7288.

From a technical point of view, the AUD/USD pair is bearish. In the daily chart, the pair is developing below a bearish 20 SMA, which extends its decline below the longer ones, providing dynamic resistance at around 0.7405. Technical indicators aim higher but within negative levels, reflecting the current advance instead of suggesting further gains ahead.

An upbeat tone could push the pair above 0.7400, mainly if the broad dollar’s weakness persists. The next relevant resistance comes at 0.7440, and it seems unlikely that the pair could break beyond this last.

An immediate support level comes at 0.7330, followed by the yearly low at 0.7288. Below the latter, the slump will likely extend toward the 0.7200 price zone. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD remains bid and approaches 1.1650 after US data

The persevering selling pressure in the greenback helps EUR/USD advancing to the area of daily highs near 1.1650 on Friday. The data from the US showed on Friday that the economic activity in the private sector continued to expand at a robust pace in early October.

EUR/USD News

GBP/USD treads water near 1.3800 after mixed UK data

GBP/USD came under bearish pressure in the early European session after the data from the UK showed an unexpected contraction in September Retail Sales. However, the British pound managed to pare its losses with the Markit PMI figures surpassing analysts' estimates.

GBP/USD News

GBP/USD treads water near 1.3800 after mixed UK data

GBP/USD came under bearish pressure in the early European session after the data from the UK showed an unexpected contraction in September Retail Sales. However, the British pound managed to pare its losses with the Markit PMI figures surpassing analysts' estimates.

GBP/USD News

Crypto bulls unfazed by flash crash

BTC closed more than 5% lower on the Thursday session, but buyers have stepped in to hold the Tenkan-Sen as support. ETH action shows that the recent rejection has caused some indecision. XRP does not have far to move to initiate a massive bullish breakout.

Read more

Apple talks over battery supplies for EV stall-Reuters

Apple (AAPL) is on a steady move higher ahead of results next week. We have had solid earnings from big names already such as Tesla (TSLA) and Netflix (NFLX), but Apple is the biggest one of all and will be the highlight of the earnings season for many.

Read more

Majors

Cryptocurrencies

Signatures