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AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Spikes Higher after RBA Leaves Tapering on Table

By:
James Hyerczyk

The RBA’s surprise move and Lowe’s comments suggest they believe the economy will bounce back quickly from the current lockdowns.

AUD/USD

In this article:

The Australian Dollar is up sharply on Wednesday after the Reserve Bank of Australia (RBA) surprised traders by announcing its willingness to keep the September tapering plan on the table. As expected, however, the RBA held its benchmark interest rate and bond purchases unchanged, despite the growing economic threat posed by lockdowns to deal with the coronavirus pandemic.

At 04:56 GMT, the AUD/USD is trading .7400, up 0.0037 or +0.50%.

Ahead of the RBA announcements, some investors felt that central bank policymakers may be forced to walk back their plan to begin tapering its bond purchases announced on July 6.

RBA Governor Lowe was expected to put off until later in the year plans to scale back weekly bond purchases, while keeping the cash rate at 0.1% on Tuesday. That’s was the view of a large majority of 18 economists surveyed by Bloomberg last week. Two of them went a step further and flagged the risk of the bank also extending its three-year yield target to the November 2024 bond.

Instead of walking back its plan, the RBA board stuck with its plan to start winding back purchases of government debt to $billion a week until at least November.

The news caught short-sellers by surprise, forcing them to aggressively cover and sending the AUD/USD sharply higher.

RBA Governor Philip Lowe said while the national economic recovery had been stronger than expected, the recent lockdowns would probably result in GDP contracting in the September quarter.

Economists are expecting the September-quarter national accounts to show a fall in GDP due to the impact of the lockdowns, which have hit Greater Sydney, Queensland, Victoria and South Australia over the past two months.

“The experience to date has been that once virus outbreaks are contained, the economy bounces back quickly. Prior to the current virus outbreaks, the Australian economy had considerable momentum and it I still expected to grow strongly again next year,” Lowe said.

“The economic outlook for the coming months is uncertain and depends upon the evolution of the health situation and the containment measures.”

Daily Forecast

The main trend is up according to the daily swing chart. A trade through .7414 will signal a resumption of the uptrend. A Fibonacci level at .7422 is a potential trigger point for an acceleration to the upside.

The RBA’s surprise move and Lowe’s comments suggest they believe this particular wave of the pandemic will be short-lived and that the economy will bounce back quickly.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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