At the end of January, the AUD/USD pair reached its multi-month high at the level of 0.8137, but the bulls of the pair could not keep the price in the area of the 81st figure. After which the Australian began to lose their positions, despite the problems of the US dollar.
The Reserve Bank of Australia supported the trend of weakening the national currency. Yet, traders switched to external factors, so the southern trend stalled at the moment. Nevertheless, the position of the Australian regulator says that the "Aussie" will continue to be under certain pressure: the growth of AUD/USD pair may be due to either a downward dynamics of the greenback or a rise in the price of the commodity market.
The growth of the world economy has changed the fundamental picture of the foreign exchange market. Many Central Banks of the world's leading countries either tightened their rhetoric about the prospects for monetary policy or went directly to action, raising the rate or curtailing economic incentives. In this regard, the RBA stands alone. one of the regulator's members last autumn even allowed the easing of monetary policy parameters due to weak growth in consumer spending. The head of the RBA, Philip Lowe, takes a consistent "dovish" position in this matter, continuing the policy of his predecessor Glenn Stevens.
During the Asian session today, the Reserve Bank of Australia held its February meeting. Contrary to popular belief that the regulator focuses attention on the growth of the commodity market and domestic macroeconomic indicators, the rhetoric of the accompanying statement turned out to be extremely low-key. On one hand, the Central Bank acknowledged the obvious facts including low unemployment rate of 5.5% in Australia, a significant increase in the retail sales increased of 1.2% compared to the 0.4% forecast, and growth of the economy by the end of the third quarter of last year. It gained 2.8% in annual terms after growth of 1.9% in the previous quarter.
Nevertheless, the regulator did not make hasty conclusions regarding further prospects. The central bank said that the southern trend is likely to continue, but the growth of key indicators will be gradual. In addition, despite the strengthening of the labor market, the level of wages leaves much to be desired, as the growth rate of this indicator disappointed members of the Australian regulator. The growth of the CPI is constrained by the exchange rate of the Australian currency. The RBA considers traditionally the value of the national currency to be too high.
As a result, the Central bank made the expected conclusion, which is continuously support the economy of the country with low level interest rates. There are no reasons for changing the current parameters. The Australian dollar disappointed with the results of the February meeting. Consequently, the AUD/USD pair continued its southern dynamics, falling to 0.7835.
Here, it is worth recalling that the problems of the Australian currency are not limited to the soft position of the RBA. The prospect of a trade war between the United States and China renders background pressure on the "Aussie". Donald Trump can limit steel imports at any time by applying Section 232 of the Trade Expansion Act, which allows the transfer of authority in the egulation of goods imports to the head of state individually, in case of imports threatening the country's national security. The relevant report of the US Department of Commerce is already at Trump, and until the spring, he must make an appropriate decision.
In addition to this report, the American Institute of Metallurgy and the Association of Steel Producers of the United States of America wrote a letter to the president demanding that he introduce a set of "large-scale prohibitive measures" in relation to the main sources of steel imports . Obviously, the "main source" is China, which poses a threat to US national interests, including economic ones in the opinion of the American leader.
The Chinese are still very reserved. Although at the end of last year, the PRC already demanded from the U.S/ that all imports of soybeans should contain not more than one percent of weeds and foreign impurities. Now, Americans are forced to purify soy, which is worth the extra money and here it is worth noting that this rule is valid only for the US. For example, a large supplier of soybean like Brazil will not be burdened by this rule.Is this fact not an element of a trade war?
In other words, trade relations between the PRC and the US are clearly deteriorating, and this fact would have an indirect negative impact on the commodity market, the Australian economy and currency. It is likely that the AUD/USD pair would demonstrate a more confident southern trend. Alternately, the prospects of a trade war weaken and the US dollar. In addition, against the backdrop of political instability and the imminent next shutdown, the US stock indices fell sharply, after which the yield of American 10-year bonds fell significantly to 2.71%, then the dollar reacted.
Today, the dynamics of the AUD/USD pair will also depend on the U.S. currency. During the European trading session, the greenback has weakened, but this fact must be treated with caution. The fall of the Wall Street yesterday may continue. Hence, any speculative decisions should be made during the American session. Technically, the pair can again test the local minimum of 0.7877, which is the first support level (the bottom line of the Bollinger Bands indicator on D1). The resistance level is 0.7990 (the middle line of the Bollinger Bands indicator, which coincides with the Kijun-Sen line).
