AUD/USD stands out as the Reserve Bank of Australia (RBA) makes no change to bond tapering plan from early September. The aussie trades above 0.74 but economists at Société Générale have low conviction of a sustained rally to 0.75 without settling of Chinese equities/metals.
Statement cites better than expected GDP growth/labour market recovery
“The RBA surprisingly decided to stand by its plan to taper AGB purchases starting early September. The bank will keep the programme under review in light of economic conditions and the health situation. In the statement, it acknowledged the strong economic recovery and expects growth will bounce back quickly from a possible contraction in 3Q once the latest virus outbreaks are contained.”
“The AUD bears are unlikely to throw in the towel quickly. Relief for AUD is likely to be short-lived until jitters in Chinese equity markets settle down. Tactically, we think AUD/USD remains a sell on rally unless the pair can overcome 0.7450).”
“Ongoing bounce is likely to persist towards the daily Kijun line at 0.7450 which is also the 23.6% retracement of the pullback from February. This is the first layer of resistance. If the pair is able to overcome this hurdle, rebound could extend towards July peak of 0.7580/0.7600.”
“Defending 0.7300 will be crucial to avert the next leg of down move.”