- AUD/USD attacks the upper end of nearby trading range.
- Virus woes get firmer with another virus strain, from California, marking resistance to vaccines.
- RBA is expected to review bond yield target, interest rate, Orr’s comments will be the key.
- US traders return after a long weekend, ISM Services PMI adds to the watcher’s list.
AUD/USD seesaws around the week-start levels, teasing resistance of a 30-pips range, as traders brace for an important day carrying the Reserve Bank of Australia (RBA) monetary policy meeting. That said, the quote trades near 0.7530 amid early Tuesday morning in Asia, unchanged on a day mainly due to the off in US markets.
Will covid set back tame RBA bulls?
Although the RBA policymakers have been hawkish ever since the Oz nation’s initial battle with the coronavirus (COVID-19), things may change this time, with the Delta variant troubling the Pacific major.
The latest updates suggest more infection in Queensland, New South Wales and Sydney while Victoria deviates from the graph. On the positive side, the government has allowed Aussies to take AstraZeneca after consulting their General Practitioners (GP), a move that sparks political angst against Scott Morrison.
Talking about data, Aussie Retail Sales and Commonwealth Bank PMIs came in upbeat for May and June respectively but AiG Performance of Construction Index for June eased below 58.3 to 55.5, following the broad trend of the Aussie data that challenge RBA hawks.
On a broader front, the UK readies the complete unlock on July 19, details of which will be out on July 12, whereas a severe covid strain called Epsilon was discovered from California that is a bigger threat due to its vaccine resistance.
Elsewhere, markets were mostly silent on Monday amid an absence of the US traders and upbeat activity numbers from the UK and Eurozone.
It’s worth noting that indecision over the Federal Reserve’s (Fed) next moves magnified, also weighing on the risk appetite and AUD/USD prices, even as Friday’s mixed employment figures probed the bulls.
Moving on, the RBA’s move to how they can overcome the easy money policies, mainly the bond purchase program and yield target for 3-year Treasury bond, will be the key even as the Australian central bank is expected to stand pat during today’s meeting. Also important will be RBA Governor Philip Lowe’s justification of the policy review. Given the covid-led pessimism, RBA announcements may weigh on the AUD/USD prices. However, the return of the US traders and PMIs will also be important to watch.
Read: Reserve Bank of Australia Preview: More dovishness in the docket
Technical analysis
A sustained break of monthly resistance line, now support, keeps AUD/USD buyers hopeful. Even so, 200-DMA near 0.7575 guards the quote’s immediate upside.
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