AUD/USD slumps 40 pips below 0.6700 on RBA inaction, US data eyed
|- AUD/USD takes offer to refresh intraday low as RBA marks inaction for the second consecutive meeting.
- RBA pushes back rate hike trajectory, by defying forecasts of 0.25% rate increase, as it keeps benchmark rates at 4.1%.
- Mixed China catalysts, upbeat yields and cautious mood ahead of second-tier US data also weigh on Aussie pair.
- Friday’s RBA Monetary Policy Statement, US NFP will be crucial for clear directions.
AUD/USD nosedives 40 pips on the Reserve Bank of Australia’s (RBA) no rate hike decision, extending the early-day losses to around 0.6670 heading into Tuesday’s European session. That said, the Aussie pair’s further downside, however, appears elusive as markets await the US ISM Manufacturing PMI for July and JOLTS Job Opening for June.
RBA defies market forecasts by keeping the benchmark rates intact at 4.1% after challenging the two hawkish surprises in the last monetary policy meeting in July. In doing so, the Aussie central bank renews dovish bias about the AUD/USD pair as it justifies the previously released downbeat Australian inflation data.
Also read: Breaking: RBA steers interest rate on a steady course at 4.10% in August
Apart from the RBA status quo, firmer US Dollar Index and downbeat China data, as well as mixed sentiment, also weigh on the AUD/USD price. That said, the US Dollar Index (DXY) renews a three-week high as Treasury bond yields rebound despite mixed US activity data published the previous day. The reason for the latest run-up in the DXY and yields could be linked to the hawkish comments from Federal Reserve Bank of Chicago President Austan Goolsbee. Also underpinning the US Dollar's strength, as well as weighing on the Aussie pair, could be the fears of more US-China tussle as Beijing restricts drone exports in retaliation to the US tech and trade war tactics, by citing the “national security” measures.
Earlier in the day, China’s Caixin Manufacturing PMI for July fails to trace its upbeat NBS counterpart while declining to 49.2 for July from 50.5 prior, versus 50.3 market forecasts, marking the lowest level since January.
Against this backdrop, S&P500 Futures trace Wall Street and print mild gains by the press time whereas the US 10-year and two-year Treasury bond yields edge higher of late.
Having witnessed the initial market reaction to the RBA moves, the AUD/USD pair traders should keep their eyes on the risk catalysts for fresh impulse ahead of the US activity and employment data. Should the early signals for Friday’s US Nonfarm Payrolls (NFP) arrive positive, the Aussie pair sellers can keep the reins. It’s worth noting, however, that the bears need validation from Friday’s RBA Monetary Policy Statement (MPS) to stay in the driver’s seat afterward.
Technical analysis
AUD/USD rebound appears elusive unless crossing a convergence of the previous support line from May 31 and the 200-DMA, around 0.6730-35 by the press time.
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