Australian Dollar Talking Points

AUD/USD trades to a contemporary yearly low (0.6681) in July as a rising variety of Federal Reserve officers present a better willingness to implement a restrictive coverage, and the Reserve Bank of Australia (RBA) Minutes might do little to affect the trade price because the central financial institution seems to be on a preset course in normalizing financial coverage.

Fundamental Forecast for Australian Dollar: Neutral

AUD/USD seems to be reversing forward of the June 2020 (0.6648) because the latest weak point within the trade price fails to push the Relative Strength Index (RSI) into oversold territory, however the latest rebound in Aussie Dollar might prove to be a correction within the broader development because the Federal Reserve normalizes financial coverage forward of its Australian counterpart.

It appears as if the RBA will stick to its present method in withdrawing financial help as “inflation is forecast to peak later this year,” and the minutes from the July assembly might gas hypothesis for one other 50bp price hike in August as “the Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead.

In flip, extra of the identical from Governor Philip Lowe and Co. might do little to shore up AUD/USD because the Federal Open Market Committee (FOMC) seems to be on observe to ship a 75bp price hike later this month, however a shift within the RBA’s ahead steerage for financial coverage might generate a bullish response within the Australia Dollar if the central financial institution steps up its effort to fight inflation.

AUD/USD Rate Rebound Susceptible to Preset Path for RBA Policy

Source: ASX

According to the ASX RBA Rate Indicator, the 30Day Interbank Cash Rate Futures August 2022 contract displays a “79% expectation of an interest rate increase to 2.00% at the next RBA Board meeting,” and a cloth likelihood within the central financial institution’s steerage might lead to a bigger restoration in AUD/USD if the board seems to be to enhance the official money price (OCR) at a sooner tempo.

With that mentioned, extra of the identical from Governor Lowe and Co. might drag on AUD/USD because the FOMC plans to implement a restrictive coverage, and the RBA Minutes might do little to prop up the trade price except the central financial institution adjusts the ahead steerage for financial coverage.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

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