- RBA says decision to pause was close call
- Australia to release confidence data on Tuesday
- US employment report a mixed bag
- There is resistance at 0.6607 and 0.6700
- 0.6475 and 0.6382 are providing support
The Australian dollar is coming off another rough week, with losses of 1.17%. The currency has looked dreadful, losing close to 300 points since July 17th. In Monday’s European session, AUD/USD is trading at 0.6556, down 0.20%.
RBA in ‘wait and see’ mode
The week wrapped up with the Reserve Bank of Australia’s quarterly policy statement, which didn’t reveal anything dramatic. The RBA paused rates for a second straight time last week and the statement indicated that the central bank is in a ‘wait and see’ mode with its rate policy. The RBA’s view is that inflation risks remain “broadly balanced” as it strives to guide the economy to a soft landing after an aggressive tightening campaign.
The statement noted that the RBA has been divided on its rate path, saying that at the July and August meetings, the board considered raising rates. In the end, those members in favour of a pause won the day at both meetings, a signal that inflation is falling down fast enough for most members. The statement maintained the RBA’s forecast that inflation will drop to 4.1% by the end of the year and to 2% by the end of 2025, with core inflation dropping to 2.9% by mid-2025.
We’ll get a look at Australian confidence data on Tuesday, with the markets braced for soft readings. Westpac Consumer Confidence is expected to dip to 80.7 in August, down from 81.3 in July. The NAB Business Confidence index is projected to decline to -3 in July, following the zero reading in June.
US employment report a mixed bag
The July employment report was a mix. Nonfarm payrolls were soft at 187,000, despite a banner ADP release which fuelled expectations of a breakout nonfarm payrolls release. Job growth is slowing, but the unemployment rate ticked lower to 3.5% down from 3.6%, and wage growth stayed steady at 4.4%.
The money markets are expecting the Federal Reserve to take a pause at the September meeting, with a probability of 84%, according to the FedWatch. It’s entirely possible that the Fed is done with tightening, but that will depend to a large extent on upcoming inflation and employment data.
AUD/USD Technical