AUD Lower Following RBA
The Australian Dollar has been weaker in the wake of the September RBA monetary policy meeting held overnight. Expectations had been broadly in favour of the bank announcing tapering, in line with the guidance offered at the last meeting and comments from RBA policy makers since. While the bank did indeed announce further tapering (weekly asset purchases to fall to AUD 4billion from AUD 5billion), the news came with the caveat that the bank will extend its asset purchase program beyond the former November deadline and into the end of February 2022. For AUD bulls, it was a case of the RBA giving with one hand and taking with the other.
Delta Concerns
In making its decision, the RBA acknowledged that there has been a strong rebound in the economy though the need to reintroduce lockdowns has weakened this recovery somewhat. Additionally, the bank is expected the pace of economic activity to be a little slower when the country re-opens fully than it has been after prior re-openings due to concerns around the Delta variant. The bank itself cited the spread of the Delta variant as one its main concerns and obstacles within its outlook.
Looking ahead, the RBA expects to see GDP return to growth over Q4, following a heavy contraction in Q3 as a result of those lockdowns. However, the economy is not expected to rebound to the levels seen pre-Delta until the second half of 2022.
Downside Risks
In all, the meeting was certainly not a bullish one. The tone of concern the bank struck over the Delta variant as well as the decision to extend asset purchases until end of February 2022 reflects the ongoing hesitation. There are clear downside risks for the Australian economy should any further lockdowns need to be introduced which might result in asset purchases being extended for longer. Though RBA governor Lowe himself says that Delta has only delayed the bank’s tightening program not derailed it, the hurdle for tightening has now been raised significantly.
Technical Views
AUDUSD
The correction higher in AUDUSD saw price hitting the 50% retracement of the decline from YTD highs. For now, price has been capped at this level and is now retesting the .7413 level from above. With indicators still bullish, the focus remains on a further push higher in the near term. Should the current sell off deepen, however, focus will shift to the .7339 and .7243 levels next as support.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.