• AUD/USD drops 10 pips following the release of the RBA's May meeting minutes
  • RBA's minutes showed the policymakers are on a wait-and-watch mode. 
  • The central bank did not buy bonds in the week ended May 11.
  • Trade tensions are keeping the AUD bulls at bay on Tuesday.

AUD/USD fell from 0.6535 to 0.6525 following the Reserve Bank of Australia's (RBA) May meeting minutes released at 01:30 GMT. 

"Members assessed that the best course is to monitor the economy, financial outcomes. Bank's policy package was working broadly as expected," the minutes showed. Further, the minutes revealed that the board was prepared to scale up bond purchases if necessary and was in favor of the yield curve control target until credible progress is made on the jobs and inflation front. 

While the bank remains committed to expanding bond purchases, if needed, it has winded things down of late. The central bank opted to forgo any bond purchases in the week of May 11 and sat on the sidelines, possibly because the three-year bond yield target of 0.25%. Further, the syndication of the new December 2030 bond was strong, suggesting the bond market is functioning well, as noted by Australia New Zealand Bank's (ANZ) research desk. 

That makes the RBA relatively hawkish than its other G-10 counterparts. The AUD, therefore, has an edge over other major currencies. 

At press time, AUD/USD is trading around 0.6530, having hit a high of 0.6552 an hour ago. While the overnight gains on Wall Street are providing positive lead, the AUD is struggling to extend Monday's rally, possibly due to the escalating tensions between China and Australia. The latter has slapped tariffs on Australia's drought-affected barley exporters, reportedly as a payback to Australia for pushing for a coronavirus probe. 

Trade tensions, coupled with the comments by the Australian Bureau of Statistics that total payroll jobs fell by 7.3% during the seven weeks to early May could put pressure on the Aussie dollar during the day ahead. 

Technical levels

    1. R3 0.6682
    2. R2 0.6605
    3. R1 0.6565
  1. PP 0.6488
    1. S1 0.6447
    2. S2 0.637
    3. S3 0.633

 

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