AUD/USD Failing at the 20 SMA After the RBA Meeting Minutes

Posted Tuesday, September 19, 2023 by
Skerdian Meta • 2 min read

As the economy of China stumbles and risk sentiment deteriorates, commodity dollars kept sliding lower since July. AUD/USD has been declining, however, and the decline continued last week as this pair fell below the 0.64 level, which had served as a prior support level. The 20 Simple Moving Average (SMA) has been acting as resistance on the H4 chart, rejecting the price twice, the last time being on Friday after a weak retrace higher.

Yesterday the Australian dollar was fluctuating around t 0.6430 level where it stayed the entire day ahead of the Reserve Bank of Australia released the minutes from this month’s meeting. The official cash rate was maintained at 4.10% by the RBA for a third month, while this was Philip Lowe’s last meeting as governor of the RBA.

Lowe left the door open for future rate increases, noting that although the RBA had “passed its peak,” it was “still too high and will remain so for some time yet.” The markets have become more dovish and are anticipating a rate cut from the RBA in 2024, so traders were very interested int he minutes for hints about potential rate changes or if the RBA would keep them elevated for an extended period of time.

Reserve Bank of Australia Meeting Minutes

Considered raising rates by 25 bps or holding steady at the September meeting
Some further tightening may be required should inflation prove more persistent than expected
Case to hold was stronger, recent data did not materially alter the economic outlook
Economy still appears to be on a narrow path by which inflation returns to target, employment grows
Members recognize the value of allowing more time to see full effects from past tightening on the economy
Policy moves will be guided by incoming data and assessment of risks
Concerned about productivity growth not picking up as anticipated, services inflation remaining sticky
Fuel prices rose sharply in August, could boost headline inflation in Q3
Members noted that the labour market remains tight, but could be at a turning point
Scheduled mortgage payments rose to a historical high of 9.7% of household income in July, set to increase further

are interesting. Yes, the headline inflation rate will get a bump from rising fuel prices. The rise has continued into September. And discretionary spending is being cut in response to rising mortgage payments. Stick those two together and the outlook for consumption appears to be dire and is likely to weigh on economic growth.

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