Australian Dollar Rises as Rates are Kept Steady by the RBA

RESERVE BANK OF AUSTRALIA, AUD/USD, COVID-19, JOBKEEPER PROGRAM, OFFICIAL CASH RATE

Key Points:

  • Could the Descending Triangle pattern topside break ignite the move to test the current 0.72 handle?
  • The fiscal stimulus might dictate the outlook of the Australian dollar with measures that are set to expire in September.
  • AUD/USD nudged higher as the RBA established the interest rates at about 0.25%.
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The AUD pushed higher as the RBA made sure that the official cash rate was held steady and according to the 0.25% expectation.

Despite momentum indicators suggesting that the worldwide contraction has already passed, the reserve bank is 100% prepared to nudge its bond purchases to make sure that the bond markets are function and to ensure they achieve the yield target.

With the speed and nature of the current economic recovery remaining uncertain, the reserve bank still believes that it is highly likely that the monetary and fiscal support will be needed for a while – perhaps based on the need for a great extension of the existing fiscal regime.

usd aud

Economic Outlook Highly Reliant on the Continued Fiscal Support

The government of Australia can be strongly commended for their efforts to keep businesses in business and Australians working as the current $259 billion economic support package defined in the march has largely put the floor under the economy during these extraordinary times.

Nevertheless, with the improved JobSeeker programs and the JobKeeper set for expiration on 27 September. Not to mention the coronavirus cases that are quickly rising in Victoria, there are is a growing point of concern that the safety net of the local economy might be prematurely stripped away.

The 7th consecutive monthly contraction within the Australia performance of the service index reinforces the current uncertainty as the employers quickly adapt to the re-imposition of the NSW-Victoria border lockdown and closure measures in many Melbourne apartment blocks.

Australia Performance Index

Australian-Dollar

Source – Trading Economics

The current outlook of Australia’s economy might come up on the upcoming economic address by the Australian prime minister, with Scott Morrison’s expected to decide on the future of the JobSeeker and JobKeeper initiatives.

While the government is under lots of pressure to extend the current fiscal measures, the PM has over time remained defied indicating that the decisions should not be rushed at a time when Australia is going through over $10 billion.

Considering the PM’ s perspective that income supporting payments might make it difficult for the Australians to enter the workforce, a great extension of these measures might not be a fully foregone conclusion. Also check out US Dollar Weakens As Mixed Data, Fed Stimulus Drive Market.

With that, it’s still necessary for the financial support to fully nurse the economy back to the way it was before the COVID-19 pandemic. It might be very disastrous if the government of Australia is not able to deliver additional stimulus amid the impending 2nd wave of COVID-19 cases.

AUD/USD CHART

From a technical viewpoint, the AUD/USD continues flirting with the main psychological resistance at about 0.7 levels after the Descending Triangle topside break consolidation.

A daily close over the previous June high, which was 0.7064, is required to confirm the bullish potential with the overbought territory readings intensifying the purchasing pressure.

AUSSIE

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