During today's Asian session, the AUD/USD pair showed an upward correction, testing the borders of the 0.73 once again. The pair enjoyed a temporary decline in the US dollar index and a downward turn in anti-risk sentiment.
The immediate reason for today's growth was the volume of Australia's retail trade data. Despite the fact that the indicator remained in the negative area, it still came out in the green zone, contrary to more pessimistic forecasts. However, any upward dynamics of the Australian dollar is only a correction, which is advisable to use for opening short positions. A lot of fundamental factors are acting against the Australian currency, which will not allow buyers of AUD/USD to reverse the downward trend. Therefore, the peak of the upward correction is set around the resistance level of 0.7330 (the average line of the Bollinger Bands indicator coinciding with the Kijun-sen line). For the last two weeks, the pair has not risen above the specified target.
After the announcement of the results of the Fed's September meeting, dollar bulls are in a somewhat confused state. The US dollar index shows a wave-like dynamics, allowing the opponents of the dollar to organize counterattacks in the main pairs of the "major group" (with the exception of the USD/JPY pair, where the USD is almost recoilless strengthening its positions). On the one hand, Jerome Powell outlined the timing of the curtailment of QE, thereby resolving the weeks-long intrigue. On the other hand, traders played a "semi-hawkish" scenario even before the meeting, while the cautious rhetoric of the Fed chairman could not give the US dollar an additional impluse. As a result, the US currency remained above but did not surge.
The current market situation was taken advantage of by buyers of AUD/USD, who moved away from local lows (0.7220) and were able to approach the 73rd figure. The situation with Evergrande also provided indirect support to the Australian dollar: the largest Chinese developer promised to find funds to pay off debts, defusing (for a while) tension in the markets. Anti-risk sentiment declined, as did the demand for protective instruments, which include the US dollar. However, the structure of the upward correction of AUD/USD looks shaky since this growth depends only on the "well-being" of the US currency. The Australian dollar still cannot take a lead.
First, the Reserve Bank of Australia is putting pressure on the AUD, which has taken a defensive position. At its last meeting, the regulator postponed the deadline for the next round of revision of the bond repurchase program. If earlier, the Central Bank planned to discuss this issue in November, then now, it has postponed this moment to February 2022, reacting to the weakening of economic indicators – primarily in the labor market. According to experts, if the labor market does not cope with the coronavirus strike in the coming months, the February "deadline" will be moved again to a later date.
As for the fate of the interest rate, the situation looks even gloomy: according to the RBA Governor, Philip Lowe, the regulator will start tightening the parameters of monetary policy "not earlier than 2024". The minutes of the September meeting published last week confirmed these time benchmarks. The Australian Central Bank noted a high level of uncertainty about the timing and pace of economic recovery. According to the members of the RBA, progress towards achieving the goals of the Central Bank "may be longer due to the delta strain of coronavirus."
Meanwhile, the COVID-19 situation in the country leaves much to be desired. On the one hand, more than half of the population over the age of 16 received the first dose of the COVID-19 vaccine. On the other hand, outbreaks of the disease are still recorded in the largest states of the country, which do not allow the authorities to relax quarantine restrictions. In particular, a new daily record of new cases of coronavirus was recorded on September 25 – 847 in the Australian state of Victoria. Meanwhile, Melbourne is experiencing the longest isolation, which has been going on for more than two hundred days. Quarantine restrictions are planned to be relaxed here approximately at the end of October when 70% of the state's residents will receive both components of the vaccine.
The commodity market also exerts background pressure on the Australian dollar. The strategically important raw material product for Australia – iron ore-continues to fall in price, falling for several weeks. Experts believe that the main reasons for the sharp decline in the cost of iron ore are China's policy of decarbonizing steelmaking processes and combating CO2 emissions.
All this suggests that any more or less large-scale corrective growth of the AUD/USD pair can be used to open short positions. As mentioned above, the peak of the price range is 0.7330 (the middle line of the Bollinger Bands indicator, which coincides with the Kijun-sen line on D1). In turn, the support level (downward target) is the level of 0.7220 – this is the lower line of the Bollinger Bands on the same timeframe.
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