- Optimism surrounding its largest consumer China and upbeat US yields entertain Aussie buyers ahead of the RBA.
- The central bank is less likely to offer any change in its monetary policy but its future policy bias will be closely observed.
AUD/USD is on the bids near 0.7110 during early Tuesday. The Aussie recovered from 0.7100 round-figure as the US Dollar (USD) witnessed profit-booking moves against the majority of its counterparts. In spite of ticking up to the highest in a week during early Monday, the quote failed to clear 50-day simple moving average (SMA) at the day-end as the US Dollar (USD) became buyers’ choice on welcome data reducing previously feared recession into the US economy.
The Australian Dollar (AUD) remains strong so far since the day start as Aussie traders followed positive Chinese data, the US stock market gains and rising yields in order to drive the currency upwards ahead of the RBA meeting.
Westpac reported that AU bond yields are higher following the surge in UST yields overnight. AU 10yr yields moved almost 6bp to 1.87%, while 3yr yields added 3.5bp to reach 1.405% – steepening the curve to 46.5bp. While mirroring UST price action, AU 10yr found some support ahead of today’s Federal Budget and the AU-US 10yr spread narrowed to -63.3bp. Ahead of today’s RBA meeting, the market is pricing 96% chance of a cut in August with a ‘terminal rate’ of 1.04% reached by June next year.
While welcome prints of China’s purchasing managers’ index (PMI) pleased the Aussie buyers at the week-start, they failed to sustain the gains as traders preferred the US Dollar after upbeat ISM manufacturing PMI signaled fewer chances of the US recession.
Looking forward, monetary policy meeting by the Reserve Bank of Australia (RBA) gains immediate attention of the AUD/USD pair’s traders. The Australian central bank is less likely to offer any change in its present monetary policy with 1.5% cash rate while expectedly offering a neutral policy bias. However, some at the desks expect recent recovery in China data and likely chances of the US-China trade deal playing their part to push the RBA policymakers towards a bit hawkish statement.
It should also be observed that February month Australian building permits could offer intermediate moves ahead of the RBA. The housing market indicator is likely to have slipped by -1.0% compared to +2.5% previous growth on a monthly basis.
On the other hand, the US Durable goods orders for February will entertain AUD/USD traders after the RBA meeting. The order growth may contract to -1.8% from the previously revised figure of +0.3% whereas the Non-defense capital goods orders ex-aircraft may stall around 0.0% from +0.8% prior.
AUD/USD Technical Analysis
Not only a daily close beyond 50-day SMA level of 0.7120 but a successful break of 0.7155 resistance-confluence comprising 100-day SMA and a six-week-old descending trend-line could also challenge Aussie buyers.
On the downside, 50% Fibonacci retracement of December 2018 to January 2019 decline, at 0.7060, could offer strong support to the pair during its drop, failing to which highlights 0.7000 and 38.2% Fibonacci retracement level of 0.6980 as crucial levels to watch.
Share
