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.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: Extra gains in the pipeline above 0.6520
AUD/USD partially reversed Tuesday’s strong pullback and regained the 0.6500 barrier and beyond in response to the sharp post-FOMC pullback in the Greenback on Wednesday.
EUR/USD meets support around 1.0650
EUR/USD managed to surpass the key 1.0700 barrier in response to the intense retracement in the US Dollar in the wake of the Fed’s interest rate decision and Chair Powell’s press conference.
Gold surpasses $2,300 as Dollar tumbles
The precious metal maintains its constructive stance and trespasses the $2,300 region on Wednesday after the Federal Reserve left its FFTR intact, matching market expectations.
Bitcoin price reclaims $59K as Fed leaves rates unchanged
The market was at the edge of its seat on Wednesday to see whether the US Federal Reserve (Fed) would cut interest rates during the Federal Open Market Committee (FOMC) meeting.
The market welcomes the Fed's statement
The market has welcomed the Fed statement, and the S&P 500 is higher in its aftermath, the dollar is lower and Treasury yields are falling. There is still only one cut priced in by the Fed.