AUD/USD drops back below 0.7400 on cautious mood, RBA Monetary Policy Statement

  • AUD/USD takes offers to refresh intraday low, reverses the previous day’s upside momentum.
  • Risk appetite sours amid covid woes, US Senators’ delay in announcing infrastructure spending plan.
  • China trade data, US employment numbers and risk catalysts in focus.

AUD/USD refreshes intraday low to 0.7384, down 0.24% on a day, while reversing the previous day’s gains amid early Friday.

In doing so, the Aussie pair ignores cautious optimism cited in the Reserve Bank of Australia’s (RBA) Quarterly Monetary Policy Statement (SOMP) as risk catalysts play their roles.

The RBA SOMP cut near-term GDP forecasts but stays optimistic of recovery moving forward. The Aussie central bank’s preferred inflation gauge, namely trimmed-mean CPI, is likely to remain intact at around 1.75% for 2021 and 2022.

Earlier in the day, RBA Governor Philip Lowe testified before the House of Representatives Standing Committee on Economics. The policymaker did cite the covid woes but also said, “The economy is expected to bounce back quickly when restrictions end.”

Hence, cautious optimism could be smelled from the latest RBA communications, be it from the monetary policy meeting, governor, or the latest statement.

However, escalating covid woes in the US, China and Australia keep AUD/USD pressured of late. As per the latest update, the US covid infections jump to the six-month high whereas China sees the highest daily coronavirus cases in the current outbreak. Furthermore, Australia’s daily covid numbers refresh the highest levels since August 2020 with the national total being around 307 at the latest.

Additionally, US Senators’ failures to roll out the details of the much-awaited infrastructure spending today, as widely expected, join the taper tantrums and the pre-NFP caution to weigh on the risk appetite, as well as on the AUD/USD.

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It’s worth noting that the hawkish central banks, be it from the UK, the US, or Australia, pays a little heed to the Delta covid variant fears and the latest positive surprise from US Jobless Claims favor challenge the pessimists.

Amid these plays, S&P 500 Futures step back from record top and the Aussie equities are also depressed by the press time. Further, the US 10-year Treasury yields gained 1.3 basis points (bps) to 1.22% after rising the most in 12 days on Thursday.

With the Chinese trade numbers on the platter and risk catalyst recently weighing down the AUD/USD prices, the pair traders may have a few more hours before witnessing the pre-NFP trading lull.

Read: Nonfarm Payrolls Preview: Why the dollar could surge in (almost) any scenario

Technical analysis

Repeated failures to cross a one-month-old horizontal resistance area surrounding 0.7400–7410 keep AUD/USD sellers hopeful to retest the monthly low near 0.7330. Meanwhile, an upside break of 0.7410 will help the pair buyers to aim for June month’s low near 0.7477.


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