The Aussie dollar started on hold after a surge over the past two weeks by nearly 4.07 percent against the U.S. dollar. It tested below support yesterday and then bounced 0.12 percent or 0.00095 points, mainly due to the appreciation of the U.S. dollar.
Australia’s central bank kept interest rates unchanged, staying at record low of 1.5 per cent as expected. It is the 13th consecutive hold since the RBA made its last move, a 25 basis point cut in August 2016. The interest rate’s hold reinforces Governor Philip Lowe’s reluctance to follow other developed counterparts tighten and policy.
“Over recent months there have been more consistent signs that non-mining business investment is picking up,” Lowe said in Tuesday’s statement. “A consolidation of this trend would be a welcome development. Business conditions as reported in surveys are at a high level and capacity utilization has risen. A large pipeline of infrastructure investment is also supporting the outlook. Against this, slow growth in real wages and high levels of household debt are likely to constrain growth in household spending”
Conditions in the global economy have improved. Employment in Australia has increased in all states and has been accompanied by a rise in labour force participation. While the wage growth remains low, which likely continues for a while. Inflation still remains low and is expected to grow gradually as the economy strengths.
Dr Lowe also noted that the appreciation since mid-year was largely due to a lower U.S. dollar, which was having an unwelcome impact, particularly in keeping inflation below the RBA’s target band.
“The higher exchange rate is expected to contribute to continued subdued price pressures in the economy,” Dr Lowe said.
Technically the intraday trading of AUD/USD is currently at 0.78537 as of 12:15 p.m. in Sydney, likely starting to rebound after finding support around 0.77848, with a weak daily Relative Strength Index (RSI 14) of 41.4244. But its ascending RSI seems to tell us a positive outlook for AUD’s bullish market.
Chart 1: AUDUSD Daily
However, when we take a look at the M30 chart of AUD/USD, it’s facing a short-term resistance found above 0.78594. In the event that it fails to break out, further decline likely occur; otherwise, investors may look for some rebound afterwards.
Chart 2: AUDUSD M30
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