AUD/USD spikes to 0.7600 neighbourhood after RBA Governor Lowe’s comments

The AUD/USD pair jumped to over one-week tops in reaction to the RBA Governor Phillip Lowe's comments, with bulls now awaiting a sustained move beyond the 0.7600 mark.

Following the previous day's subdued/range-bound price action, the AUD/USD pair caught some aggressive bids on Tuesday and built on its post-NFP strong bounce from seven-month lows. This marked the third consecutive day of a positive move and was sponsored by a combination of factors.

An unexpected rise in the US unemployment rate overshadowed the big beat on the headline NFP print and eased market fears about an earlier than anticipated policy tightening by the Fed. This, in turn, acted as a headwind for the US dollar and extended some support to the AUD/USD pair.

The buying interest picked up pace after the RBA Governor Phillip Lowe – during the post-meeting press conference – said that the condition for a lift in the cash rate relates to inflation, not wages. Focus on wages does not mean we have a target for wages growth or that wages growth necessarily has to have cleared a specific benchmark before we adjust interest rates, Lowe added further.

Earlier the Australian central bank left the benchmark interest rate and the three-year bond yield target unchanged at 0.10%. The RBA also reduced the rate of purchases from A$5 billion to A$4 billion per week until 11 November 2021, though said that the step down is not a representation of withdrawal of support.

As investors assess the RBA's monetary policy stance, bulls took a brief pause near the 0.7600 mark. This is followed by the recent swing highs, around the 0.7615 region, which if cleared decisively will set the stage for a further near-term appreciating move. The AUD/USD pair might then aim to test the next relevant hurdle near the 0.7650-60 supply zone.

Market participants now look forward to the US economic docket, highlighting the release of the ISM Services PMI later during the early North American session. The data might influence the USD price dynamics and produce some short-term trading opportunities. The key focus, however, will remain on the FOMC meeting minutes, due for release on Wednesday.

Technical levels to watch