Special report: Australian dollar steady after RBA meeting minutes ahead of Fed and BoJ

The Australian dollar was little changed in response to the RBA meeting minutes that were released today for the September conclave.

The bank cited concerns of global growth prospects going forward but noted that current economic indicators were fairly robust in most parts of the developed world, including Australia.

Lockdowns in China remain a hindrance for supply chains and expensive energy prices are hampering many parts of the world.

On Friday, in an appearance before a parliamentary committee, RBA Governor Philip Lowe reiterated his opinion that as rates become elevated, the case for further large boosts decreases.

He stated that the RBA will be considering a hike of either 25 or 50 bp at their next meeting on 4th October. The tightening of monetary policy is to calm a rising tide of inflation. The last read of year-on-year CPI to the end of the second quarter came in at 6.1%.

The US Federal Reserve is meeting on Wednesday and is anticipated to raise rates by 75 basis points (bp) according to a Bloomberg survey of economists. There has been speculation of a 100 bp tightening but the market has this priced as only a slim possibility.

This rate disparity may put AUD/USD under pressure, particularly if forward guidance from the Fed is more hawkish than they have already been.

AUD/JPY on the other hand is eyeing off seven-year highs as the Bank of Japan is expected to maintain very loose monetary policy at its meeting this Thursday.

Earlier today, Japanese CPI data came in slightly stronger than anticipated. Year-on-year headline inflation was 3.0% to the end of August instead of the 2.9% forecast.

The RBA’s September meeting minutes can be read in full here.

AUD/USD technical analysis

AUD/USD continues to languish near two-year lows. It remains within a descending trend channel after testing the topside of it last week and it may continue to offer resistance, currently intersecting at 0.6810.

The 21-day Simple Moving Average (SMA) coincides with that level at the moment, potentially adding more weight to it.

After failing to break above the descending trend line, a Bearish Engulfing Candlestick formation was created. At the same time, the price moved below all short, medium and long term SMAs and all SMAs are displaying a negative gradient. This may suggest that bearish momentum could continue to evolve.

The break point of 0.6670 appears to be shaping up as crucial level of support having been tested on Friday and again on Monday. A clean move below that level may further confirm bearish momentum, while it could provide a base for bulls if it continues to hold.

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. 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. See full non-independent research disclaimer and quarterly summary.