The AUD/USD pair was trading higher on Tuesday after RBA’s monetary policy decision for August. At the time of writing, the pair hit an intraday low of 0.7357.
RBA Monetary Decision
According to Philip Lowe, the governor, the board decided to maintain the cash rate at 10 basis points and the interest rate on Exchange Settlement balances of 0%. The board also decided to maintain the target of 10 basis points for April 2024.
The government securities will continue to be purchased at the rate of $5 billion a week until early September and $4 billion a week until mid-November.
According to the Reserve Bank of Australia, the country’s economic recovery has been advancing faster. However, with the surging coronavirus cases, the recovery is expected to slow down. The GDP for the September quarter is expected to slip.
The Australian economy has gathered momentum and is expected to grow strongly again next year. The vaccination program, as well as policy support, has been aiding in the recovery. The economic outlook for the next months is uncertain due to the Covid-19 infections.
However, the government expects the economy to grow slightly by more than 4% in 2022 and 2.5% in 2023. The labor market has been recovering with the unemployment rate falling 4.9% in June. Job vacancies are at a high level.
According to the latest report, the board is committed to maintaining accommodative monetary conditions to support a return to full employment and inflation consistency in Australia. The Board will not increase its cash rate until inflation is sustainably within the 2 or 3% target range.
The AUD/USD will react to the US ADP Nonfarm Employment Change or July later this week. Economists polled by Dow Jones expect the numbers to increase to 695,0000 up from the previous 692,000 in June.
AUD/USD Technical Outlook
For the past two weeks, the AUD/USD pair has been trading within a tight range. The pair has been trading within the 0.74028 and 0.73305 ranges.
At the time of writing, the pair rose 0.54% at 0.74029. On the 4-hour chart, it is trading above the 25 and 50-day exponential moving averages.
In the near term, I expect the pair to break out further from the horizontal channel to the upside. If this happens, the bulls will be targeting the 0.74782 level. On the flip side, a bearish break out will have the bears targeting July’s low at 0.72890.