- AUD/USD drops below 0.7650, down 25 pips after RBA’s no rate change, additional bond purchase.
- Trading sentiment firms as market frenzy take a back-seat, for now, US stimulus hopes, China’s readiness to ties with America.
- Risk catalysts keep the driver’s seat, equities, silver will be the key to watch.
AUD/USD fades the initial upside momentum while declining from 0.7660 to currently around 0.7640 following the Reserve Bank of Australia’s (RBA) interest rate decision during early Tuesday.
Although the Aussie central bank matched wide market expectations on the rate change, keeping it changed at 0.10%, coupled with the three-year yield target, not many on the floor expected additional quantitative easing (QE) of $100 billion of bonds.
Read: RBA keeps OCR at a record low of 0.10%, as expected
The RBA statements suggesting that it doesn't see conditions for CPI rise met until 2024 seems to favor AUD/USD bears off-late.
Read: RBA: Decision to extend QE program will ensure a continuation of this monetary support
Earlier in the day, market sentiment wobbled initially as an increase in margin requirements for silver trading the Gamestop’s weakness stopped bulls from cheering Wall Street’s upbeat performance. However, US President Joe Biden’s “substantive and productive” stimulus discussions with Republicans renewed optimism. Also on the positive side could be China’s readiness to give a fresh start to the diplomatic relations with the US, as per Senior Chinese diplomat Yang Jiechi.
Against this backdrop, S&P 500 Futures gain 0.50% whereas stocks in Australia and Japan are up around 1.0% by press time. Further, the US 10-year Treasury yields also recover to 1.088%, up 1.1 basis points (bps), by press time.
Having witnessed the initial reaction to the RBA’s monetary policy move, AUD/USD traders will keep their eyes on the risk catalysts. In doing so, the retail rush towards silver and certain stocks may regain attention. Also in the spotlight will be the relief package talks at the White House.
Technical analysis
A sustained break of the one-week-old falling trend line, currently around 0.7650, directs AUD/USD buyers toward a 21-day SMA level of 0.7720. Meanwhile, Thursday’s low of 0.7590 holds the gate for sellers’ entry.
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