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AUD/USD rebounds, focuses on RBA minutes amid Fed-driven momentum


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Despite challenges, the AUD/USD rebounded from a dovish RBA decision, propelled by the Fed's stance on 2024 rate cuts.

 
original-size.webpSource: Bloomberg
 

 Tony Sycamore | Market Analyst, Australia | Publication date: 

This time last week, the AUD/USD was in the doldrums due to a dovish RBA on-hold decision, a sub-par Australian Q3 GDP report, and a strong US jobs report which conspired to see it fall from a nineteen-week high.

The gloom lifted later in the week as the Fed rode to the rescue, validating expectations of rate cuts in 2024, sending the US dollar into a tailspin, and encouraging a new round of risk-seeking flows that supported the AUD/USD. The rebound leaves the AUD/USD just 100 pips below where it finished in 2022 at .6816, suddenly within touching distance of finishing 2023 in the green.

However, before it can cross that bridge, it must first withstand the minutes from the RBA’s board meeting in December.

RBA meeting minutes (Tuesday, December 19th at 11.30 am AEDT)

The minutes from the Reserve Banks meeting in November are scheduled to be released Tuesday, December 19th at 11.30 am.

At its meeting in November, the RBA kept its official cash rate on hold at 4.35%, supported by a string of cooler-than-expected data across house prices, retail sales, and inflation. The RBA retained a tightening bias, using the same watered-down wording in the November statement:

"Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks."

The board meeting minutes will be closely scrutinised around what options the board considered at the meeting, the factors that would prompt the RBA to act on its tightening bias in 2024, including stubborn inflation and a tight labour market, and search for any clues that might suggest the RBA feels its tightening cycle is close to completion.

RBA cash rate chart

 
original-size.webpSource: RBA

AUD/USD Technical analysis

Following last Thursday's dovish FOMC meeting, the AUD/USD springboarded from ahead of support at .6535/25, above the 200-day moving average at .6577 and downtrend resistance at .6650 from the February .7157 high.

While the AUD/USD holds above the three support points noted above, the AUD/USD could extend its rally towards the next layer of resistance at .6800/30, coming from highs between April and May of this year. Above here, resistance at .6900c comes from highs in June and July.

AUD/USD daily chart

 
original-size.webpSource: TradingView
  • Source TradingView. The figures stated are as of 18 December 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
 

 

 

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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