AUD/USD to struggle to surpass the 0.75 resistance – MUFG

The Australian dollar initially rallied following the hawkish decision from the Reserve Bank of Australia (RBA) to stick to their plans to begin tapering QE this month with the AUD/USD hitting an intraday high of 0.7468 before quickly giving up those gains and falling back towards the 0.7400-level. The pair is set to struggle to break above resistance at around the 0.7500-level, economists at MUFG Bank report.

See: AUD/USD a bit weaker after RBA embraces flexibility, but should pass – ING

RBA decides to taper QE but extend duration of purchases 

“The price action overnight is disappointing for those looking for the AUD to strengthen further in the near-term. We were expecting a more positive reaction in response to a decision from the RBA to stick to their QE taper plans given ourselves and the consensus view was for a delayed taper.” 

“While the RBA did stick to hawkish plans to slow the weekly pace of QE purchases to AUD4 B from AUD5 B, it was partially offset by the dovish decision to extend those purchases until at least mid-February 2022 from their previous plan to carry on until at least mid-November. The longer duration of QE purchases helps to partly explain the more muted response for the aussie to the taper decision.

“The decision to extend the QE purchases until at least February 2022 reflects the delay in the economic recovery and increased uncertainty associated with the delta outbreak. At the same time, the RBA continues to signal that it does not expect to begin raising rates before 2024.” 

“Even though the RBA has started to slow weekly QE purchases, its overall plans to normalize policy going forward remain amongst the more dovish spectrum put forward by G10 central banks. It suggests that it will be more challenging for AUD/USD to extend its recent rebound above the 0.7500-level and back towards the 200-day moving average at around 0.7600 in the near-term.”