Here’s why AUDUSD rally paused after the RBA interest rate decision

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Written By: Crispus Nyaga
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    Summary:
  • AUDUSD pair rally paused after the RBA interest rate decision. This is because investors are worried about the rising risks in Australia after record growth

The AUDUSD pair is little changed as traders react to the RBA interest rate decision. The pair is trading at 0.6952, which is 30 basis points below where it ended the day yesterday.

RBA interest rate decision

In its interest rate decision today, the RBA left interest rate unchanged at 0.25% as most analysts were expecting. The bank also said that it had started tapering its asset purchases because the three-year government yield has remained at the target. Still, it committed to continue supporting the economy if needed.

The rate decision came at a time when the Australian economy is doing well. Last week, data showed that the manufacturing and services sectors did better than what most analysts were expecting. Also, retail sales rose while the country’s exports increased at a faster pace.

However, there are risks in the economy. For one, the number of coronavirus cases in Melbourne and Victoria has been rising. This has led the two populous states to announce restrictions to movements. Lockdowns are also on options that are being considered, meaning that the country’s growth is at risk.

Another risk is that most jobs are being supported by the government. Since this support will not remain forever, there are risks that some jobs will disappear forever. The economy has already lost about 800,000 jobs because of the pandemic.

There is also a risk in the housing market. The government will end its support for the mortgage sector in September. Therefore, there is a risk that the number of defaults could jump in September, when this support ends. In a statement, Governor Lowe said:

“Uncertainty about the health situation and the future strength of the economy is making many households and businesses cautious, and this is affecting consumption and investment plans.”

AUDUSD technical analysis

The AUD/USD pair is trading at 0.6952, which is slightly below the day’s high of 0.7000. On the daily chart, the price is above the 50-day and 100-day simple moving averages. The price is also above the Ichimoku cloud. It is also above the ascending trendline shown in pink. Therefore, while there are still risks, the pair is likely to continue rising as bulls target the previous high of 0.7065.

On the flip side, a move below 0.6833 will invalidate this trend. This price is at the intersection of the ascending trendline and the black support.

AUDUSD technical forecast

Written By: Crispus Nyaga

Crispus Nyaga is an analyst and consultant with more than 8 years of experience. He started trading Forex while completing his BSc degree and he has worked for brokers like OctaFX, easyMarkets, & Capital. He has also contributed widely in leading websites like rkdream.com, SeekingAlpha, iNvezz, DailyForex, and BanklessTimes. In 2017, Crispus completed his MBA.

Published by
Written By: Crispus Nyaga