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The RBA Board meeting seemed unlikely to stoke much A$ volatility and that proved to be the case, with AUD/USD heading into the announcement at 0.7640 and managing only about a 5-10 pip bounce afterward, according to economists at Westpac who believe AUD/USD price action over the past week has reinforced the view that the aussie is more of a buy on dips than a sell on rallies, with daily closes no lower than 0.7580.

The Reserve Bank of Australia sticks to its dovish stance

“Governor Lowe repeated that the aussie ‘remains in the upper end of the range of recent years’ and asserted that the RBA’s various monetary measures contribute ‘to a lower exchange rate than otherwise’. There was very little comment on global developments but ‘global trade has picked up and commodity prices are mostly higher than at the start of the year’.”

“The accelerating US recovery is underpinning global risk appetite, with MSCI World Index closing Monday at another record high. Still, the US’s stark outperformance of the Eurozone on virus control and vaccine rollout should keep Dollar Index underpinned for now, indirectly capping AUD/USD rallies. And we are presumably heading into a period of softer Australian data in the wake of the expiration of the JobKeeper program.”  

“The aussie should continue to find support on dips to the mid-0.75s but is likely capped for now in the 0.7700 area. A return to the 0.80 handle may have to wait until Q3.”