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RBA's Lowe happy to keep AUD/USD weak

AUD/USD Faces Trouble at the 200 Daily SMA, After RBA’s Lowe Dovish Pledge

Posted Tuesday, July 6, 2021 by
Skerdian Meta • 2 min read

AUD/USD has shown resilience despite turning bearish in the last month or so. It used to be extremely bullish, as it climbed around 25 cents from the bottom last year, but the bullish trend sort of faded since February and after trading sideways until June, supported by MAs, it finally turned bearish by the middle of June.

But, it is still being stubborn, trying to resume the uptrend. Although, the 200 SMA (purple) has turned into a solid resistance indicator on the daily chart, so buyers are going to have some trouble pushing above it. Particularly since the Reserve Bank of Australia governor Lowe pledged to remain dovish until 2024 at least earlier today.

The 20 daily SMA (gray) is also adding to the 200 SMA (purple)

This pair climbed higher nonetheless, but failed at the 200 SMA once again, so chances are that AUD/USD will turn bearish soon and head lower, with restrictions still in place in some areas in Australia. Below are the Lowe’s comments from the RBA meeting:

AUD/USD Live Chart

AUD/USD

RBA Governor Philip Lowe Speaking

  • Do not expect cash rate to be increased until 2024 at the earliest
  • Step down from A$5 billion to A$4 billion bond purchases weekly not a representation of withdrawal of support in this area
  • Wants to see inflation above 2% for a number of quarters
  • Wants to see wage growth sustainably above 3%
  • Need much more positive wage growth forecast to expect rate hikes in 2023
  • That does not seem likely
  • So, unlikely cash rate will be raised before 2024
  • Expects further upward revisions to economic forecasts

Well, much like most forecasts and central bank views, a lot of it will be subject to how economic conditions develop moving forward so we’ll have to wait and see. But the RBA has laid out earlier that they won’t be considering any shift in stance prior to November this year, so expect more of the same by Lowe in the months ahead. AUD/USD has given back almost all gains now, so the reversal is already underway.

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