What Drives AUD Lower? June 02, 2021

What drives AUD lower?

The Aussie weakens extremely against U.S. dollar after RBA’s Policy Rate Decision released yesterday. No changes were there in RBA’s Monetary Policy Statement and overall confirming dovish message too. Let’s take a look on key highlights from the RBA Meet:

  • Cash rate target unchanged at 0.10%, as expected
  • 3 year yield target unchanged at 0.10%, as expected
  • RBA will not increase the cash rate until actual inflation is sustainably within the 2% to 3% target range
  • Conditions for a rate rise unlikely to happen until at least 2024, at the earliest
  • High priority on a return to full employment
  • At Its July Meeting, The Board will consider whether to retain the April 2024 bond as the target bond for the 3 – year yield target or to shift to the next maturity

Just after RBA’s meet, China Central Bank published the following news:

  • China Central Bank – We actively encourage financial institutions to adopt a dollar – denominated loan with a floating-rate benchmark.
  • China’s Central Bank – A relevant agreement for domestic Libor derivatives is currently seeking input and will be announced shortly.
  • China’s Vice Premier Liu He and U.S. Treasury Secretary Janet Yellen Agree China – U.S. Economic Ties Very Important.

One side China is putting limited trade deal with Australia while on other side China is expanding trade deals with the U.S. Today in Asian hours, Australia too released GDP q/q data higher than expected but lowered than previous quarter.

Technical View:

AUD/USD: The Aussie depreciates sharply on Wednesday and touches $0.7715 mark in European hours. The pair made intraday high at $0.7773 and low at $0.7715 mark. A day chart is bullish but H1 chart with triple EMA is about to give successful crossover for the bearish trend. A sustained close above $0.7770 on H1 chart requires for the upside rally. Alternatively, a consistent close below $0.7702 will check further supports.

Key Resistances: $0.7772, $0.7790, $0.7826, $0.7854, $0.7878

Key Supports: $0.7702, $0.7677, $0.7650, $0.7638, $0.7597

Take a look and do trade wisely!

Good Luck