The Australian Dollar has remained well bid this week in response to the RBA meeting minutes, released overnight, which saw the bank striking a broadly optimistic tone. The RBA noted that its adjustments in monetary policy were working “broadly as expected”, citing an economic recovery in most parts of the country.
Key quotes from the minutes:
“Members reaffirmed that there was no need to adjust the package of measures in Australia in the current environment. Members agreed, however, to continue to assess the evolving situation in Australia and did not rule out adjusting the current package if circumstances warranted.”
In terms of judging the global impact of the virus, the RBA concluded: “Members observed that business conditions in several large economies had improved in June and that this seemed to have extended into July. Surveyed conditions in the services sector, which had been very badly affected during the lockdowns, had rebounded particularly strongly.”
Notably, the RBA struck a particularly optimistic tone when discussing its largest trading partner, China, saying: “Members noted that the Chinese economy had recovered strongly, and by more than generally expected, in the June quarter. Steel-intensive sectors were generating levels of output around or above pre-outbreak levels, which was supporting Australia’s exports of bulk commodities. Fiscal and monetary policy easing in China had also been supporting the recovery.”
In terms of the domestic impact of the virus, the RBA noted that: “the economic downturn in Australia over the first half of 2020 was the most severe in many decades: staff estimates suggested a decline in GDP of around 7 per cent and a contraction in hours worked of around 10 per cent.” However, the bank was also keen to stress that: “Though very large, the downturn in the first half of the year had been smaller than predicted a few months earlier because restrictions had been less onerous and had been lifted earlier than expected.”
Finally, in terms of guidance, the bank reiterated its message of reassuring, advising that it will retain an accommodative monetary stance as long as necessary to support the economy, whole also recognising the uncertainty in the outlook.
AUDUD ( Bullish above .72014)
From a technical viewpoint. The AUDUSD is now once again testing the .72014 level, which has been the chief resistance following the breakout above the long term bearish trend line. If price can sustain a breach of this level, the next upside target to note is the .7508 region. To the downside, any correction lower should find support into a retest of the broken trend line and structural support around .6815.
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