Pocket outbreaks of Coronavirus regionally and globally are causing governments to continue recalibrating their central scenarios for recovery. This is causing the dollar to become increasingly more volatile as traders weigh in on the next most likely direction of the pandemic. You can find everything you need to know about the current state of the greenback from our latest EURUSD analysis.
At its August policy meeting from earlier today, the Monetary Policy Committee (MPC) of the Reserve Bank of Australia expectedly decided to maintain the near-negative Cash Rate unchanged at 0.10 per cent. RBA expects the GDP growth rate to decline in the September quarter as pandemic conditions in Australia worsened.
The policy decision caused the Aussie to jump in the several hours following the meeting, as can be seen on the 4H chart above. Even still, the AUDUSD remains in range as the price action comes close to the 23.6 per cent Fibonacci retracement level at 0.74308 from below.
It could be argued that ever since bullish momentum started rising in the short term, as underpinned by the MACD indicator, the price action has begun appreciating within the boundaries of a weak ascending channel.
That is why traders can expect another reversal once it touches the channel's upper boundary, which looks poised to happen simultaneously with the test of the 23.6 per cent Fibonacci.
In the wake of RBA's August meeting, the price action shot above the 50-day MA (in green) and the 100-day MA (in blue). However, the 150-day MA (in orange) is currently converging with the 23.6 per cent Fibonacci, making it a more significant resistance.
But even if the price action manages to penetrate above the channel and the 0.74308 barrier, it would then have to test the descending trend line (in red), which is just as likely to initiate another reversal.
The RBA would continue purchasing government securities at the rate of $5 billion a week until early September, as the coronavirus fallout continues to represent a major impediment to growth.
Recent coronavirus outbreaks in Australia have affected economic activity, which is why the bank expects GDP growth to decline in the third quarter.
"The economic recovery in Australia has been stronger than was earlier expected. The recent outbreaks of the virus are, however, interrupting the recovery and GDP is expected to decline in the September quarter. The experience to date has been that once virus outbreaks are contained, the economy bounces back quickly. Prior to the current virus outbreaks, the Australian economy had considerable momentum and it is still expected to grow strongly again next year."