Australian Dollar, AUD / USD, Trade Balance, Federal Reserve – Talking Points
- Aussie dollar quickly abandons its post-RBA price gain against the USD
- Australia’s trade balance considered the main possible event risk for the AUD
- Interest-free AUD / USD technical outlook as buys sell out quickly
Thursday’s Asia-Pacific Outlook
The Australian dollar rose overnight in the aftermath of the Reserve Bank of Australia (RBA) decision on this week’s rates that disappointed accommodative bets. Economists expected the RBA to reverse its intention to start reducing its balance sheet in September. Instead of, Governor Philip Lowe maintained his plan to reduce weekly asset purchases to A $ 4 billion per week, from A $ 5 billion. This helped push the AUD / USD higher, as the central bank caught investors off guard. It should be noted that the RBA sees certain conditions under which a rate hike may not occur until at least 2024.
However, comments from Federal Reserve Vice Chairman Richard Clarida caused the US dollar to rise against most of its peer currencies, including the Australian dollar. The vice president bolstered expectations of a rate hike in early 2023 after saying economic conditions for a will likely be reached by the end of 2022. Wall Street fell on Clarida’s comments, with the Dow Jones Industrial Average closing 0.92% lower.
Somewhere else, the Central Bank of Brazil raised its key rate by 100 basis points, from 4.25% to 5.25%, as planned. Brazil is facing a price spike in its entire economy, which has been the main elevator driver on fares. The central bank plans further tightening at its next meeting to keep inflation well above target.
Today’s economic brief for the Asia-Pacific session will see draws from the Philippines, Indonesia and Australia. The Philippines will release inflation figures in July, with analysts expecting a 3.9% increase from 4.1% in June. Indonesia’s second-quarter GDP growth rate is also expected to reach 2.94% quarter-on-quarter, analysts said.
Australia’s trade balance figure is probably the biggest risk factor today. Economists expect cross-border trade to total A $ 10.45 billion in June, according to a Bloomberg survey. This would be slightly higher than the result for May. High iron ore prices throughout July likely supported the high value of cross-border transactions. The metallic mineral product is Australia’s largest export. A better than expected figure today could bode well for the AUD / USD. Watch the DailyFX Economic CalendarDear to stay up to date on today’s market events.
AUD / USD technical outlook:
The Australian dollar has remained lower since the fall overnight. AUD / USD failed to hold gains above the lower 20-day Simple Moving Average (SMA) despite briefly breaking above the September 2020 high, which served both support and resistance in recent months. The MACD is on the rise, but the bullish price momentum has failed to take off.
AUD / USD daily chart
Graphic created with TradingView
Australian Dollar TRADING RESOURCES
— Written by Thomas Westwater, Analyst for DailyFX.com
Contact Thomas, use the comments section below or @FxWestwateron Twitter