While the latest surprise bond purchases and extension of the Quantitative Easing (QE) in February have poured cold water on the face of expectations favoring the RBA’s action, AUD/USD traders await the policymakers’ view on the Pacific’s major economy to forecast near-term moves. As a result, Tuesday’s monetary policy meeting by the Reserve Bank of Australia (RBA) gains the market’s attention despite likely offering no entertainment around 03:30 GMT.
RBA has recently been taming the bond bears with its unscheduled offering of the three-year bonds. However, market players aren’t convinced of the central bank’s ability to ward off the reflation fears and hence comments on the same will be closely observed. Also important will be the policymakers’ reaction to the recent improvement in Aussie economics and the coronavirus (COVID-19), as well as vaccine, updates
Westpac follows market sentiment while saying,
We expect that the RBA will make no changes to the policy settings at the March Board meeting (2:30 pm Syd/11:30 am Sing), but markets will focus on any commentary.
On the same line, FXStreet’s Valeria Bednarik said,
The Australian dollar may suffer if policymakers stretch their outlook towards an economic comeback and a possible rate hike, although it’s quite an unlikely scenario. Policymakers may delay any conclusion on yields’ volatility effects on their policy until next month.
How could the RBA decision affect AUD/USD?
AUD/USD drops to a fresh intraday low around mid-0.7700 by the press time of Tuesday’s Asian session. In doing so, the aussie pair defies the previous day’s upside momentum amid a lack of major positives as well as downbeat Australia Building Permits for January, -19.4% MoM versus -3.0% forecast and +10.9% prior. It’s worth mentioning that the previous risk-on mood fades despite an absence of any major negatives and hence a positive update from the RBA can recall the AUD/USD bulls.
Technically, a sustained bounce-off 50-day EMA, currently around 0.7700, eyes a downward sloping trend line connect highs marked during January 06 and February 16, near the 0.7800 threshold. Any further upside will eye the 0.7870 whereas the AUD/USD bears can target the previous month’s low near 0.7560 on breaking 50-day EMA.
About the RBA interest rate decision
RBA Interest Rate Decision is announced by the Reserve Bank of Australia. If the RBA is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the AUD. Likewise, if the RBA has a dovish view on the Australian economy and keeps the ongoing interest rate, or cuts the interest rate it is seen as negative, or bearish.
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