The Reserve Bank of Australia met earlier today for its monthly monetary policy review. As widely expected, the RBA left rates unchanged noting that since the bank cut rates just last month, more economic data needed to be reviewed before taking further policy decisions. In its monetary policy statement, which was rather brief, the RBA noted that while there was a pickup in household spending including an increase in dwelling construction indicating a growth in the economy but one that is below the longer term average.
The RBA also commented on the Australian Dollar’s exchange rate noting that while the currency declined against the Greenback, it was much less against a basket of currencies and said that it was a necessary step considering the decline in commodity prices.
The RBA’s monetary policy statement concluded that the board would continue to assess the economy as and when more economic data is available.
The Aussie reacted bullishly to the event with the AUDUSD trading near 0.767 levels and testing a longer term trend line on the hourly charts while the AUDNZD managed to stay strong above 1.07 levels.
The next major fundamental risk to the Australian dollar comes from tomorrow’s quarterly GDP data which is expected to have rise by 0.6% from 0.5% previously. A better than expected GDP print will most likely support the bullish momentum in the AUD currency pairs.
AUDUSD – Technical Analysis
The AUDUSD has been declining for 13 straight sessions on the daily chart and today’s price action at the time of writing looks to be forming, what could be a bullish engulfing candlestick pattern. If prices manage to remain supported above 0.765, we could expect a continuation to the upside.
On the hourly charts, we notice a strong bullish divergence being formed with price currently trading near the trend line. Prior to this, there was also a break out from a triangle pattern, to the upside indicating a potential move higher.
A successful break of the trend line will see price action rally towards 0.7729 and 0.78 if the momentum can help continue to support the prices to the upside into tomorrow’s GDP data. Using the Fib retracement tool and measure the current declines, we get the 0.77985 level showing confluence with the 61.8% retracement level as well, pointing to a continuation to this this term correction.
With today’s US trading session being light, the lack of economic data is likely to see a weaker Greenback considering that yesterday’s Core PCE price index remaining subdued at 0.1%. As far as the US Dollar is concerned, the next major event is due on Wednesday with the ADP payroll data. Fundamentally as well, the current market scenario looks to be favorable for the Australian dollar in the very short term ahead of the GDP numbers tomorrow.