AUD/USD is up for the key moves as not only the Reserve Bank of Australia’s (RBA) quarterly Monetary Policy Statement but China’s Trade Balance is also up for publishing, respectively around 01:30 GMT and 02:00 GMT on Friday. It should additionally be noted that RBA Assistant Governor (Economic) Luci Ellis is also up for speaking at 01:45 AM GMT and will be closely followed for fresh impulse as well.
With the coronavirus (COVID-19) led lockdowns and worsening conditions in Victoria, Aussie policymakers are less likely to keep their hawkish bias. Further, traders are also anticipating a downward revision to the economic forecast to challenge the AUD/USD pullback from an 18-month top.
On the other hand, forecasts concerning China’s Trade Balance suggest figures to recede from $46.42 to $42B in July. Further, the YoY Exports likely to slump from +0.5% to -0.2% whereas the Imports may drop to 1% from 2.7% previous readouts.
Westpac follows the market suit to anticipate hardships for Aussie bulls:
RBA will release full detail of its updated forecasts in the August Statement on Monetary Policy. In Tuesday’s statement, Governor Lowe revealed that the forecast of -6%yr contraction by end 2020 has not changed, though they trimmed 2021 growth slightly, to +5%. Their assessment of the risks ahead will also be of interest and any commentary on the A$ bounce. Assistant Governor Economic Luci Ellis will then speak via an ABE webinar. China’s July trade and foreign reserve data is due along with the Q2 current account detail. Exports and imports are expected to be roughly flat versus July 2019.
How could it affect AUD/USD?
With the worsening of virus woes in Victoria getting a major attention off-late, RBA policymakers’ dovish tone could give reasons to the AUD/USD sellers to seek entries from the multi-month high. On a different page, the latest weakness in China’s PMI has already been ignored and hence any major disappointment from Beijing’s trade numbers will become necessary for the bears’ entry if RBA catalysts flash positive signals.
Technically, a sustained break of 0.7200 gives a free hit to attack the year 2019 top surrounding 0.7300. Alternatively, an ascending trend line from May 22 joins 21-day EMA to limit downside around 0.7110-0.7100 during the quote’s declines past-0.7200.
Key notes
AUD/USD sits near 1.5 year top above 0.7200 ahead of a busy day
RBA Preview: COVID running a muck? An Exy Aussie? Nah, no worries mate!
About RBA Monetary Policy Statement
The RBA Monetary Policy Statement released by the Reserve bank of Australia reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. It is considered as a clear guide to the future RBA interest rate policy. Any changes in this report affect the AUD volatility. If the RBA statement shows a hawkish outlook, that is seen as positive (or bullish) for the AUD, while a dovish outlook is seen as negative (or bearish).
About China’s Trade Balance
The Trade Balance released by the General Administration of Customs of the People’s Republic of China is a balance between exports and imports of total goods and services. A positive value shows a trade surplus, while a negative value shows a trade deficit. It is an event that generates some volatility for the CNY. As the Chinese economy has an influence on the global economy, this economic indicator would have an impact on the Forex market. In general, a high reading is seen as positive (or bullish) CNY, while a low reading is seen as negative (or bearish) for the CNY.
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