AUD/USD: RBA concerns about aussie strength to trigger a deep correction

AUD/USD finished the sixth straight week in the positive territory as gained more than 4% in July. Therefore, the Reserve Bank of Australia (RBA), which holds its monetary policy meeting tomorrow, may start to concern about the AUD’s market valuation. The aussie could see a correction lower if the central bank expresses voices such concerns, FXStreet’s Eren Sengezer reports.

Key quotes

“Today, the ISM’s Manufacturing PMI data from the US will be watched closely by the market participants. The market expectation points out to a contraction in the manufacturing sectors’ economic activity with the PMI dropping to dropping to 48.4 from 52.6 in June. A worse-than-expected reading could revive concerns over a sluggish recovery and put additional weight on the USD’s shoulders.”

“On Tuesday, the RBA will announce its interest rate decision and release the policy statement. With AUD/USD rising to its highest level in nearly 18 months and inflation dropping into the negative territory in the second quarter, the RBA could start voicing concerns over AUD strength and trigger a deep downward correction.”

“On Friday, the US Bureau of Labor Statistics will release its monthly employment data. Investors expect NFP to increase more than 2 million in July. If the USD’s performance remains correlated with the US Treasury bond yields, a positive reading could help the DXY gain traction and weigh on the aussie. On the other hand, a disappointing NFP could make it difficult for the USD to find demand as it would likely cause investors to start pricing additional Fed stimulus.”