Australian Dollar Forecast Ahead Of The Reserve Bank Of Australia Decision

COMMODITY PRICES, COVID-19, RBA, AUD FUNDAMENTAL OUTLOOK – KEY POINTS

  • The near-term pullback in the prices of commodities might drag on the highest trade-sensitive currency.
  • The AUD may continue trekking higher with the RBA shooting down the foreign exchange intervention.
  • The most likely intervention of COVID-19 lockdown measures in Victoria might disrupt the Australian dollar

AUD TECHNICAL OUTLOOK – MIXED

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The Aussie dollar above 30% rally from the previous yearly low might be highly attributed to 3 main key factors, including the RBA stand on the negative rate policy, rising prices of commodities, and the successful health outcomes as compared to other developed nations.

VICTORIAN LOCKDOWN RESTRICTIONS TO BE EXTENDED

Nevertheless, the sustained rise of coronavirus cases in Victoria, which is the 2nd most populated city and surging clusters in Queensland and New South Wales to affect the risk-sensitive currency trot to new yearly high.

With Victoria reporting a record 723 cases on 30 July, premier Daniel Andrews is without a doubt certain to further extend phase 3 restrictions beyond the suggested 6-week timeline with the steps that have been taken have not been enough to reduce the highly infectious COVID-19.

Australian-Dollar-Outlook

Source – Covid19Data

Further indicating that there is a chance for economic recovery until and unless we get the numbers to start to reduce. On the other hand, Brett Sutton, who is chief health officer, is contemplating the possibility of the kiwi lockdown restrictions since nothing is completely off the table since the inception of the mandatory mask-wearing guideline back on 19th July.

Taking into account the current lockdown restrictions are expected to cost the government about $1 billion every week, the extension of phase-3 lockdown restrictions might drag on the performance of domestic risk assets in the next few weeks. With imposition for the New Zealand style measures likely to fuel a period of considerable risk aversion.

RBA’s STAND ON NIRP UNDERPINNING AUSTRALIAN DOLLAR

The RBA stand on the negative interest rate policy (NIRP) has without a doubt underpinned the highly sensitive currency as members of the federal bank agreed that the interest rates remain highly unlikely.

Furthermore, the RBA agreed that there is no reason for intervention in the foreign market considering the limited effectiveness once the exchange rate is significantly aligned with the fundamental determinants.

Despite the weakened technical backdrop the governor and associates are expected to maintain the official interest rate steady at about 0.25% with the conclusions of talks at the July board meeting was that the right course of action is to retain the mid-March package and continue monitoring the impact of the COVID-19 crisis on the economy.

In this regard, the RBA’s wait and see strategy might continue to buoy the risk-linked AUD against the major peers with the federal reserve typically taking the shackles off this currency, further assuring the participants of the market that the federal reserve set planning any optional policies.

Data Source – Bloomberg

COMMODITY PRICES BUOY THE TRADING SENSITIVE AUSTRALIAN DOLLAR

The commodity-associated currency, it doesn’t come as a surprise that the GSCI commodity index 50% rally from 2020 low has extensively coincided with the AUD recovery from March extremes. This also means that the AUD/USD Pulls Back Off 15-Month Highs, Bulls Target Rebound.

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